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Wellington - Asian equities tumbled to a three-year low and commodities slumped, boosting demand for haven assets amid waning investor confidence in the global economy.
Chinese shares in Hong Kong sank to their lowest levels since the depths of the global financial crisis, while Japan’s Topix index entered a bear market.
Hong Kong dollar forwards fell to their weakest level since 1999 as capital outflows pushed up borrowing costs in the city. Oil dropped below $28 a barrel in New York, weighing on US equity-index futures and emerging-market currencies. The yen strengthened for the first time in three days and 10-year Treasury yields approached the lowest level since mid-October.
With investors fixated on China’s economic slowdown and the fallout from oil’s slide to a 12-year low, a global rebound in share prices from the lowest levels since July 2013 petered out during US trading on Tuesday. The International Monetary Fund (IMF) cut its world growth outlook, highlighting weaker prospects for commodity-producing nations and risks tied to the Federal Reserve’s exit from ultra-low interest rates.
“We’ll continue to see a tug-of-war between nervous sentiment and technical indicators showing that falls have gone too far,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities in Tokyo. “At the root of the selling we’ve seen this year has been the imbalance of oil supply and demand, so until the oil-price moves calm down, the stock market will struggle.”
Stocks
The MSCI Asia Pacific Index lost 2.8% at 08:28, heading for the lowest close since September 2012. PetroChina sank 6.4% in Hong Kong and Australia’s Woodside Petroleum retreated 2.8%.
Hong Kong’s Hang Seng Index dropped 3.8% amid growing concern that capital outflows will drive up borrowing costs and weigh on real estate prices in the former British colony. The Shanghai Composite Index lost 1.1%.
Japan’s Topix index retreated 3.7%, extending its drop from an August high to 21%. BHP Billiton dropped 3.5% in Sydney as the world’s biggest mining company reduced its full-year iron ore forecast. Standard & Poor’s 500 Index futures fell 1.8% after the benchmark gauge ended on Tuesday up less than 0.1%.
“Oil and the Chinese economy are still the two major reasons for concern,” said Miyuki Ohgami, a senior strategist at Mizuho Securities in Tokyo. "There might be temporary rebounds like we had yesterday, but as long as the future for our two major reasons for concern remains unclear, it’ll be difficult to see a genuine rebound."
Currencies
Hong Kong’s dollar dropped as low as HK$7.8229 versus the greenback, within 0.35% of the weak end of its allowed trading range. Hong Kong dollar forwards sank to their weakest level since 1999 amid speculation the city will end its 32-year- old currency peg. The yuan weakened 0.1% in offshore trading.
New Zealand’s currency fell 0.5% after consumer prices dropped more than economists forecast in the fourth quarter, adding pressure on the central bank to cut interest rates. A Bloomberg gauge of emerging-market currencies slipped as the ringgit depreciated 0.3% against the dollar and Korea’s won weakened 0.7%.
The yen gained 0.8% versus the greenback as investors gravitated to currencies seen as havens during times of market angst.
Commodities
Oil extended its decline from the lowest close in more than 12 years, with futures losing 3.2% in New York before weekly US government data forecast to show crude stockpiles expanded. Inventories probably increased by 2.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration Thursday.
Copper slipped 0.3% in London, while spot gold prices increased 0.4%.
Bonds
The benchmark US 10-year note yield fell seven basis points on Wednesday to 1.99%, near the lowest level since October 14. Rates on similar-maturity bonds in New Zealand dropped 7 basis points to 3.23%.
Money-market rates in Hong Kong rose, with the three-month Hong Kong Interbank Offered Rate increasing 8 basis points to 0.55%, the highest since June 2010. It climbed to a record 16.57% in 1998, when speculative bets against the currency peg surged during the Asian financial crisis.
