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Asian shares slump on China fears

Publication Date : 28-01-2014


Thai unrest and currency woes in Argentina and Turkey add to jitters


Hopes of a pre-Chinese New Year stock market rally have been all but extinguished as a sell-off of emerging markets continued yesterday.

Worries over China's financial sector were a major source of unease, with currency woes in Turkey and Argentina and Thailand's deepening unrest adding to the witch's brew.

Jittery investors reacted in the most natural way, scrambling for the exits and sending markets spiralling downwards.

Tokyo's 2.51 per cent fall and the 2.11 per cent tumble in Hong Kong made the 1.09 per cent drop in Singapore's Straits Times Index look mild in comparison.

South-east Asian emerging markets took heavy hits with Jakarta shedding 2.58 per cent and Bangkok losing 1.98 per cent.

Investors have been moving money to European and US markets amid signs that the years of easy credit there may be ending.

Still, Europe was lower last night with British shares down 1.1 per cent. Wall Street futures were slightly higher, offering hope of a respite after the recent tumble.

"It's looking to be a volatile week ahead," said Singapore remisier Alvin Yong. "Investors will not have much room to move if events move against their favour," he said, noting the local bourse will close on Friday and trade only half a day on Thursday due to the Chinese New Year.

Remisier Gary Goh said that the market is "going through a bit of a correction".

The main culprit yesterday was China, where financial distress faced by a major trust fund company highlighted problems in the shadow banking sector. Some pressure was removed when the fund, China Credit Trust Co, said yesterday afternoon that it had made a deal to restructure a financial product that it earlier sold.

Still, the worries came hot on the heels of last week's poor mainland manufacturing data there.

In the world's largest economy, United States central bankers were gearing up for their January policy meeting - and adding to the jitters of investors. A US$10 billion cut in its massive money printing programme, to US$75 billion monthly, had been announced at the previous Federal Reserve meeting.

Investors were worried that more cuts would come at the two-day meeting to be concluded before Asian markets open on Thursday. The meeting may "introduce more volatility", said Desmond Chua, a market analyst at CMC Markets. "We will find out whether the Fed will continue to scale back its stimulus programme by another US$10 billion."

Investors also kept an eye on Argentina's devaluation of the peso and Thailand's continued political turmoil. Turkey's central bank announced support for the lira after it fell the most in a month.

The uncertainty fuelled demand for safe-haven assets, with gold up 0.1 per cent to US$1,270.50 an ounce, after earlier hitting its highest since mid- November at US$1,278.01.


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