Asian shares fell yesterday with Europe’s debt crisis hitting sentiment, while news that North Korean leader Kim Jong-il had died also weighed amid uncertainty over the geopolitical outlook.
Markets began the day on a low after Belgium’s credit rating was cut, France’s outlook lowered and six other eurozone members put on downgrade watch. Seoul closed down 3.43 percent, or 63.03 points, at 1,776.93, Tokyo shed 1.26 percent, or 105.60 points, to close at 8,296.12 and Sydney tumbled 2.38 percent, or 98.8 points, to 4,060.4
Hong Kong closed 1.18 percent lower, or 215.18 points, and Shanghai lost 0.30 percent, or 6.61 points.
North Korean state television said the 69-year-old Kim died on Saturday. Stock markets extended their already deep losses amid nervousness about the future direction of the nuclear-armed country, with little known about heir-apparent Kim Jong-un, who is in his late 20s and considered inexperienced.
South Korean Deputy Finance Minister Choi Jong-ku said authorities in Seoul would monitor financial markets.
The US dollar jumped to 1,199.00 Korean won after the news of Kim’s death, from 1,164.30 before. It later eased to 1,175.40.
“Uncertainty is mounting as there are worries over the direction of North Korea and its leadership,” Ichiyoshi Investment Management fund manager -Mitsushige Akino said.
“Investors are simply in a rush to liquidate their positions,” he told Dow Jones Newswires.
On Friday, Moody’s Investors Service cut Belgium’s credit rating by two notches, citing tough conditions for in-debt European countries to borrow with little chance of a quick end to the eurozone crisis.
The agency reduced Brussels’ rating to from “Aa1” to “Aa3,” with a negative outlook.
Fitch Ratings lowered its outlook on France’s triple-A rating to negative from stable, saying the debt crisis “constitutes a significant negative shock to the region and to France’s economy and the stability of its financial sector.”
The agency also placed six eurozone nations, including Spain and Italy, on watch for a downgrade.
Hiroichi Nishi, general manager of the equity division at SMBC Nikko Securities, said: “Downgrades don’t really surprise us these days, but they will still weigh on sentiment.”
The euro bought US$1.3008 and ￥101.31 in Asian trade yesterday, compared with US$1.3032 and ￥101.37 in New York late on Friday.
The dollar was also at ￥77.93, up from ￥77.81.
Meanwhile, European shares rose yesterday supported by defensive stocks as worries about global growth, after the death of Kim Jong-il, and a warning from Fitch about possible credit downgrades kept investors from riskier cyclical sectors.
Worries about the eurozone debt crisis also kept investor’s out of riskier stocks after Fitch Ratings warned a “comprehensive solution” to the crisis was beyond reach and said it might cut France and six other euro zone countries credit rating.
Fund flow research suggested an elevated level of risk aversion by overseas equity investors over the past week.
Additional reporting by AFP