Global Liquidation Triggers Limit Down in Multiple Asia Markets
Global Liquidation Triggers Limit Down in Multiple Asia Markets
(Bloomberg) -- Stocks in Asia tumbled anew as anxiety about global recession grips investors. Circuit breakers were set off in multiple markets even as global governments and central banks are seen taking unprecedented measures to stem a public health crisis.
Trading halts were triggered from Manila and Jakarta to Seoul and Karachi. Shares in the Philippines tanked as much as 24% after resuming trading from a two-day shutdown, spurring the exchange to review its circuit breaker rules. The country’s benchmark index pared losses to close down 13%, a record fall. South Korea’s Kospi fell as much as 9.5%, while Indonesian benchmark plunged 5% before tripping a suspension for the fourth time in six days.
The Asian stock benchmark index fell as much as 4.1% to its lowest level since 2016 after gaining as much as 1% in earlier trading, as investors quickly shrugged off news about the European Central Bank’s extra emergency bond-buying program worth 750 billion euros ($820 billion).
“Margin calls, liquidations, forced sell-off and redemptions are forming a self-reinforcing negative spiral,” said Margaret Yang, a strategist at CMC Markets Singapore Pte.
Trading desks continue to speak of the mentality of “selling everything” except the U.S. dollar, with huge liquidations and de-leveraging taking place everywhere. Bloomberg’s dollar gauge has risen to the highest on record.
“It’s part of a global unwinding of risk positions and likely to carry on until significant government intervention,” said Justin Tang, head of Asian research at United First Partners in Singapore.
Central banks in Asia Pacific took further actions on Thursday to soften the impact of the coronavirus contagion. Australia’s central bank trimmed the cash rate to 0.25% on Thursday, its effective lower bound. The Philippines followed by slashing 50 basis points, the most since the bank moved to a rate-corridor system in 2016. Indonesia lowered by 25 basis points while Taiwan axed its lending rate by a similar amount to a record low of 1.125%.
Still, active managers are saying that cheap valuations for Asian stocks are reviving opportunities for stockpickers. According to Fidelity International Ltd., the market turmoil has led to a sizeable dislocation between prices and fundamental value for Asian stocks particularly in China, India and Japan.
For most investors, the escalating fallout from the pandemic means an inability to make reliable earnings or economic forecasts. “Low confidence plus high volatility means that daily swings will be swifter and no trend can establish itself,” said Olivier d’Assier, head of APAC applied research at analytics firm Qontigo GmbH.
“The market meltdown is reviving the specter of the GFC— when the notion of safe asset shrinks dramatically, and equities, gold, and treasuries can sell-off in tandem,” according to a note from Edelweiss Financial Services Ltd.
©2020 Bloomberg L.P.