Asia: Stocks sink as Japan caps worst week since financial crisis

[SINGAPORE] Asian stocks extended the selloff that sent global equities into a bear market, with the regional benchmark index heading for its lowest close since 2012, as Japanese shares tumbled to cap their worst week since the financial crisis.

The MSCI Asia Pacific Index dropped 2.8 per cent to 113.21 as of 4:01 pm in Hong Kong. The gauge is headed for a 6 per cent decline this week.

The Topix index slumped 5.4 per cent on Friday, bringing its weekly drop to 13 per cent, as investors resumed trading after a holiday to the prospects of a stronger yen.

Combined losses in US and European equities dragged the MSCI All-Country World Index down 20 per cent from a record reached in May, the common definition of a bear market.

Central bank activity remained in focus as negative interest rates have eclipsed investor worries over China's fading economy and the near two-year collapse in oil prices.

Sweden lowered interest rates that are already below zero, about two weeks after Japan shocked markets by imposing negative rates in a bid to quell the turmoil. Investors ignored a second day of testimony from Janet Yellen, whose indication that the Federal Reserve won't rush to raise benchmark interest rates in the face of global ructions failed to stem the selloff in risk assets.

"Markets are losing faith in the central banks and their ability to stabilise the situation," Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about US$21 billion, said by phone. "Central banks will have to think of unconventional policies they can implement.

The global economy is extremely weak."

JAPAN SLUMPS

The Topix finished at the lowest level since October 2014 as the yen traded near a 15-month high. The measure's weekly drop was the biggest since October 2008.

The currency's surge is intensifying speculation Japan officials may intervene to arrest gains that threaten to undermine almost three years of monetary stimulus. Finance Minister Taro Aso said Friday the government is watching market movements and will take any action necessary. After a regular meeting with Prime Minister Shinzo Abe, BOJ Governor Haruhiko Kuroda said he would watch market moves closely.

Central banks from Japan to Europe signaling that additional easing is at the ready is failing to ease investor concern over global growth. Japan reports fourth-quarter gross domestic product figures on Feb 15, with economists surveyed by Bloomberg expecting a 0.7 per cent contraction on an annualized basis.

"Negative psychology is racing ahead," said Ryuta Otsuka, a strategist at Toyo Securities Co. in Tokyo. "We're in a moment where Peter Pan thinks he can't fly any more. When everyone thinks they can't fly, we're doomed. There's nothing we can do but to try to overturn that sentiment."

TRADING HALT

South Korea's Kospi index fell 1.4 per cent. Trading in the country's Kosdaq exchange for smaller stocks was temporarily halted after the benchmark gauge plunged more than 8 percent on concern valuations were excessive relative to earnings prospects.

New Zealand's S&P/NZX 50 Index lost 0.9 per cent. Australia's S&P/ASX 200 Index slid 1.2 per cent. Singapore's Straits Times Index added 0.1 per cent. Markets in mainland China, Taiwan and Vietnam remain closed for the holidays and resume trading Monday.

Hong Kong's Hang Seng Index fell 1.2 per cent to the lowest close since 2012 as insurers and banks declined. Hong Kong stocks have lost almost US$2 trillion in market value from an April peak, data compiled by Bloomberg show. The Hang Seng China Enterprises Index dropped 2 per cent to the lowest since March 2009.

BROAD DECLINES

The regional benchmark gauge has slumped 14 per cent this year as investors shun risk assets and shares from Shanghai to Tokyo trade in bear markets. The Shanghai Composite Index is down 22 per cent in 2016, while the Topix has lost 23 per cent. Even New Zealand's benchmark gauge, the best performer among 24 developed markets tracked by Bloomberg, has slumped 6.2 per cent.

The deepening stock-market rout is continuing to pummel investment banks around the world. Japanese brokerages tumbled, with Nomura Holdings Inc. sinking 9.2 per cent to close below its price when Shinzo Abe became prime minister in December 2012. HSBC Holdings Plc was the biggest drag on the Hang Seng Index, dropping 2.8 per cent.

Toyota Motor Corp tumbled 6.8 per cent as the stronger yen dimmed the outlook for the the carmaker's profit when repatriated. BGF Retail Co. plunged 17 per cent in Seoul as the South Korean convenience-store operator reported profit that missed estimates.

E-mini futures on the Standard & Poor's 500 Index added 0.5 per cent on Friday after the underlying US equity benchmark index finished 1.2 per cent lower on Thursday.

OIL REBOUNDS

West Texas Intermediate oil jumped as much as 5.9 per cent Friday in New York as speculation swirls over whether producers will act to bolster the market. The contract slumped 4.5 per cent on Thursday for a sixth day of declines.

Next week brings readings on economies from Japan to Singapore and Taiwan, as well as a slew of data from China including inflation, trade and new loans.

BLOOMBERG