Asian stocks declined for a third week after Standard & Poor’s Rating Service cut the US credit rating and as concern grew Europe’s debt crisis would spread, sparking speculation the global economic recovery would weaken.
“Fear has taken over,” said Paul Xiradis, who manages about US$12 billion in assets as CEO of Ausbil Dexia Ltd in Sydney. “It’s like a rapid fire burning away the market, but like all things it’s going to exhaust itself eventually. There are obviously still concerns about what’s happening in the US, Europe and China, but it appears to me we’re seeing all the classic signs of a blowout or a climax.”
The MSCI Asia Pacific Index dropped 3.3 percent to 121.92 for the week, extending a three-week decline to 12.3 percent. Investor confidence has eroded in recent weeks as a deadlock in the US Congress brought the government to the brink of default, while economic reports showed the world’s biggest economy was slowing. Signs Europe’s debt crisis was widening also battered sentiment.
Japan’s Nikkei 225 Stock Average sank 3.6 percent for the week after the government cut its forecast for economic growth this year to 0.5 percent from 1.5 percent previously after the earthquake and tsunami in March disrupted production. South Korea’s KOSPI slumped 7.7 percent even after the central bank left interest rates for a second month. Taiwan’s TAIEX fell 2.7 percent to 7,637.02, led by the drop in tech heavyweight HTC Corp (宏達電)
China’s Shanghai Composite Index fell 1.3 percent this week after the country’s inflation accelerated to the fastest pace in three years in July, limiting the scope for monetary easing to support growth. China’s benchmark index along with Hong Kong’s Hang Seng Index and Australia’s S&P/ASX 200 Index dropped more than 20 percent from their peaks this week, entering so-called bear markets.
The MSCI Asia Pacific Index has tumbled 12.4 percent since July 26 amid a global selloff that erased more than US$7 trillion from world markets since July 26. The slump deepened this week after S&P on Aug. 5 downgraded the US credit rating. The Asian gauge is trading at 12.2 times estimated earnings, the lowest since December 2008.
The global stocks rout prompted South Korea, France, Spain, Italy and Belgium to ban short selling. Short-sellers sell borrowed shares with plans to buy them back later at a lower price, a practice politicians and some investors blame for roiling markets.
In other markets on Friday:
Manila rose 0.25 percent, or 10.71 points, from Thursday to 4,321.73.
Wellington closed up 0.25 percent, or 7.88 points, from Thursday at 3,216.50.
Singapore closed 1.94 percent, or 54.37 points, higher from Thursday at 2,850.59.
Jakarta shares rose 0.55 percent, or 21.16 points, from Thursday to 3,890.53.
Kuala Lumpur ended up 0.49 percent, or 7.21 points, from Thursday to close at 1,483.67.
Mumbai closed down 1.29 percent, or 219.77 points, from Thursday to end at 16,839.63, as investors unwound positions before the long Independence Day weekend, which sees the Bombay Stock Exchange shut tomorrow.
Bangkok’s markets were closed on Friday.