Asian stock markets yesterday caught the global selling fever after new warnings of world recession and as fears grew over the future of European banks with heavy exposure to sovereign debt.
Investors across the region picked up on the mounting anxiety evident in the US and Europe, where the markets saw fresh carnage on Thursday.
Safe havens were the main beneficiaries, with gold soaring and the yield on 10-year US Treasury bonds briefly touching a new low.
Photo: AFP
Adding to woes in the region were fears that a slowdown in the galloping growth seen in China — a key driver of the world economy — could hit equities.
“Given the bloodbath seen across global equity markets overnight, it is not at all surprising to see our market experiencing sharp and broad-based losses,” IG Markets analyst Ben Potter said in Australia, adding that there was no end in sight. “From experience, these situations always go on for a lot longer than people think they should. Given the global financial crisis is still so fresh in people’s minds, the market is going to have to do a lot to win back the confidence of investors.”
Tokyo tumbled 2.51 percent, hit by the double-whammy of global fears and the persistently strong yen, with the headline Nikkei index at down 224.52 points at 8,719.24.
Sydney shed 3.51 percent. The benchmark S&P/ASX 200 was down 149.3 points at 4,101.9.
Seoul plunged 6.22 percent, with the benchmark KOSPI down 115.70 points at 1,744.88. South Korean exporters, such as Samsung Electronics and Hyundai Motor, bore the brunt of the losses.
Hong Kong dropped 3.08 percent with the benchmark Hang Seng index down 616.35 points to 19,399.92. Shanghai shed 0.98 percent, or 25.11 points, to finish at 2,534.36.
The worldwide sell-off came after Wall Street investment bank Morgan Stanley warned that the US and eurozone economies were “dangerously close” to a double-dip recession.
Stocks were further punished by a fresh round of gloomy economic data from the US, such as jobless claims, and growing doubts about the ability of European banks to withstand the 17-nation eurozone’s debt crisis.
The rout continued in European trade, with the continent’s main bourses all showing large losses in early trade.
London’s FTSE-100 index of leading shares sank 3.07 percent to 4,935.73 points, Frankfurt’s DAX 30 lost 4.41 percent to 5,355.79 points and Paris’ CAC 40 index showed a loss of 3.43 percent to 2,974.54 points.
Gold and US Treasury bonds — both safe havens in times of trouble — broke record ground, with bullion closing at a record US$1,862-US$1,863 an ounce. It had finished Thursday trade at US$1,794-US$1,795.
Yields on 10-year US Treasury bonds were down at one point on Thursday to an all-time record low of 1.974 percent, breaking the record of 2.007 percent set on Dec. 18, 2008, at the height of the US recession.
By the end of the day in New York, the 10-year US Treasury yield was at 2.07 percent, compared with 2.17 percent late on Wednesday, while the 30-year yield was at 3.42 percent, down from 3.57 percent.
A report in the Wall Street Journal that the US Federal Reserve was worried about the liquidity of major European banks contributed to the sell-off in European markets.
French lenders came under especially intense pressure, with Societe Generale losing more than 12 percent.
“Europe is frankly a mess and the United States, which I’m normally much more optimistic about, we’ve seen a crisis which was created by the partisan nature of its current politics,” said Mike Smith, head of one of Australia’s big four banks, ANZ. “That’s created further concern to what was already a pretty fragile recovery.”
Concerns were not confined to the developed world. At Deutsche Bank, economists focused on the impact of slower Chinese growth on the rest of the world.
They foresaw a “soft landing” for China this year and next, but concluded that “global stock markets will likely be negatively impacted by a Chinese slowdown.”
They said the world’s second-biggest economy would grow 8.9 percent this year, down from 10.3 percent last year, and by 8.3 percent next year, “mostly due to the effect of monetary tightening.”
DECOUPLING? In a sign of deeper US-China technology decoupling, Apple has held initial talks about using Baidu’s generative AI technology in its iPhones, the Wall Street Journal said China has introduced guidelines to phase out US microprocessors from Intel Corp and Advanced Micro Devices Inc (AMD) from government PCs and servers, the Financial Times reported yesterday. The procurement guidance also seeks to sideline Microsoft Corp’s Windows operating system and foreign-made database software in favor of domestic options, the report said. Chinese officials have begun following the guidelines, which were unveiled in December last year, the report said. They order government agencies above the township level to include criteria requiring “safe and reliable” processors and operating systems when making purchases, the newspaper said. The US has been aiming to boost domestic semiconductor
Nvidia Corp earned its US$2.2 trillion market cap by producing artificial intelligence (AI) chips that have become the lifeblood powering the new era of generative AI developers from start-ups to Microsoft Corp, OpenAI and Google parent Alphabet Inc. Almost as important to its hardware is the company’s nearly 20 years’ worth of computer code, which helps make competition with the company nearly impossible. More than 4 million global developers rely on Nvidia’s CUDA software platform to build AI and other apps. Now a coalition of tech companies that includes Qualcomm Inc, Google and Intel Corp plans to loosen Nvidia’s chokehold by going
ENERGY IMPACT: The electricity rate hike is expected to add about NT$4 billion to TSMC’s electricity bill a year and cut its annual earnings per share by about NT$0.154 Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has left its long-term gross margin target unchanged despite the government deciding on Friday to raise electricity rates. One of the heaviest power consuming manufacturers in Taiwan, TSMC said it always respects the government’s energy policy and would continue to operate its fabs by making efforts in energy conservation. The chipmaker said it has left a long-term goal of more than 53 percent in gross margin unchanged. The Ministry of Economic Affairs concluded a power rate evaluation meeting on Friday, announcing electricity tariffs would go up by 11 percent on average to about NT$3.4518 per kilowatt-hour (kWh)
OPENING ADDRESS: The CEO is to give a speech on the future of high-performance computing and artificial intelligence at the trade show’s opening on June 3, TAITRA said Advanced Micro Devices Inc (AMD) chairperson and chief executive officer Lisa Su (蘇姿丰) is to deliver the opening keynote speech at Computex Taipei this year, the event’s organizer said in a statement yesterday. Su is to give a speech on the future of high-performance computing (HPC) in the artificial intelligence (AI) era to open Computex, one of the world’s largest computer and technology trade events, at 9:30am on June 3, the Taiwan External Trade Development Council (TAITRA) said. Su is to explore how AMD and the company’s strategic technology partners are pushing the limits of AI and HPC, from data centers to