Asian stocks tumbled the most in almost three years this week, with the regional benchmark index also falling 10 percent from its May peak on concern a global economic recovery is weakening.
The MSCI Asia Pacific Index tumbled 7.8 percent to 126.08 this week for its biggest weekly loss since October 2008. The gauge this week dropped more than 10 percent from its May 2 high this year, a decline that some investors define as a correction. Shares fell on four out of the five trading days this week, climbing only on Monday after US President Barack Obama said US congressional leaders had reached an agreement to raise the US’ debt ceiling and cut the federal deficit.
“It’s a panic attack from fear that growth is dropping off a cliff,” said Prasad Patkar, who helps manage the equivalent of US$1.7 billion at Sydney-based Platypus Asset Management Ltd. “There was an expectation that resolution of the US debt-ceiling issue would trigger a relief rally. It looks like everyone forgot about the weakness in the underlying economy.”
Taipei saw the heaviest fall among Asian stocks on Friday, diving 5.58 percent, or 464.14 points, to close at 7,853.13. The closing figure marked a 9.15 percent plunge for the week. The TAIEX had opened on Monday at 8,644.18.
Japan’s Nikkei 225 Stock Average sank 5.4 percent for the week. South Korea’s KOSPI tumbled 8.9 percent. Hong Kong’s Hang Seng Index slumped 6.7 percent and China’s Shanghai Composite Index dropped 2.8 percent.
Australia’s S&P/ASX 200 Index plunged 7.2 percent as the Reserve Bank of Australia slashed its economic growth forecast for this year to 2 percent from its previous estimate of 3.25 percent. The gauge has lost more than 17 percent from its April 11 high this year, nearing the 20-percent-level that some investors call a bear market.
Concern the global recovery may be derailed drove investors out of stocks this week and into the relative safety of US Treasuries, the Swiss franc and yen.
“The latest weakness in stocks is the product of global investors coming to the conclusion that global growth is no longer getting incrementally better and may even get worse,” said Angus Gluskie, who manages about US$350 million at White Funds Management in Sydney. “The moves this week reflect the mental capitulation of investors from hope to pessimism and each day’s fall is only reinforcing the negative outlook.”
The MSCI Asia Pacific Index lost 8.4 percent this year through Friday, compared with drops of 4.6 percent by the S&P 500 and 13.4 percent by the STOXX Europe 600 Index.
In other markets on Friday:
Manila slipped 1.42 percent, or 63.98 points, from Thursday to 4,437.55.
Mumbai fell 2.19 percent, or 387.31 points, from Thursday to 17,305.87.
Wellington slumped 3 percent, or 101.27 points, from Thursday to 3,276.51, its lowest level since December last year.
Additional reporting by staff writer