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Stocks toppled from Japan to Australia as traders turn to havens
[TOKYO] Asian stocks slid to a two-year low as the selloff that has spread to almost every corner of the global equity market intensified, spurring demand for haven assets.
Stock gauges from Japan to Australia sank with US index futures, indicating the rout that sent the Dow Jones Industrial Average into a correction Friday has further to run. Australian bonds and the yen found favor as Treasuries held gains with gold, while concern over a global glut continued to dog oil.
"Things are probably going to get worse before they get better," Nader Naeimi, head of dynamic asset allocation at AMP Capital Investors Ltd in Sydney, which oversees about US$118 billion, said by phone. "You really need rate cuts and more policy easing in China. In the meantime, things can get worse. We've got to see more clarity around the Fed." Taiwan curbed short selling of borrowed stocks at the weekend, while China allowed pension funds to buy shares for the first time as policy makers seek to stymie a selloff that saw equities from Hong Kong to Indonesia enter bear markets on Friday. More than US$5 trillion has been wiped from the value of global stocks since China unexpectedly devalued the yuan, igniting a wave of concern over world growth amid angst over US monetary tightening plans and the downward trend in oil.
The MSCI Asia Pacific Index fell for a seventh straight day, sinking 1.8 per cent by 9:18 am Tokyo time, set for its lowest close since Aug 28, 2013. Japan's Topix index and Australia's S&P/ASX 200 Index lost at least 2.3 per cent, while futures on the Dow slipped 0.7 per cent. Australian 10-year bond yields fell five basis points as the yen climbed to a six-week high. US crude lost 1 per cent after briefly breaching US$40 a barrel again. Copper fell 0.9 per cent with nickel.
Global shares slid to their weakest level since October 2014 on Friday as concern over emerging-market losses infected US markets. Junk bond yields jumped to an almost three-year high, while Treasuries posted their best weekly gain in five months as investors favored safer assets. Ongoing concern over a global glut stoked oil's retreat, which saw New York-traded crude cap its longest run of weekly declines since 1986.
China's securities regulator also said over the weekend that it will penalize major shareholders in publicly traded companies for violating rules limiting stake sales. Major investors at 20 companies constitute the list of offenders, according to a statement from the body. It wasn't specified what the penalties would be.
Anxiety over China's faltering economy has fueled ructions in global markets a number of times this year, with a rout in the nation's equities sparking declines from Asia to the US last month. The Shanghai Composite Index appeared to resume that downward trend last week, sliding more than 11 per cent for its worst slump since the start of July.