Asian stocks fell for a second week, with the regional benchmark index capping the first monthly loss in seven months, amid concern the US Federal Reserve would scale back its stimulus, causing interest rates to rise.
Shares in Japan, the world’s best performing major market, entered a correction as the yen rose.
The MSCI Asia Pacific Index fell 2.7 percent to 134.84 this week, capping a 5.1 percent plunge last month. Japan’s TOPIX slumped 4.9 percent this week, extending its loss from its May 22 high to 11 percent. A correction is defined as a drop of more than 10 percent from a recent peak.
“There’s ongoing concern about policy tightening overseas, and overall money flow has turned risk off,” said Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management Corp. “That global environment brought into relief the overheating of Japanese shares. That’s why we saw a correction.”
The MSCI Asia Pacific Index has retreated 6.6 percent from the closing level on May 20, which was the highest since June 2008. Asia’s benchmark trades at 13.2 times average estimated earnings, compared with multiples of 14.8 for the Standard & Poor’s 500 Index and 13.2 for the Europe 600 Index, according to data compiled by Bloomberg.
Japan’s Nikkei 225 Stock Average slumped 5.7 percent, its biggest weekly loss since the week ended March 18, 2011, in the aftermath of a record earthquake and tsunami and subsequent nuclear disaster.
Japanese exporters fell as the yen traded near a four-week high of ￥100.47 against the US dollar on Thursday, the highest since May 9. A stronger yen cuts the value of their overseas earnings when repatriated home. Sony dropped 2.9 percent to ￥2,049. Toyota Motor, the world’s biggest carmaker, slid 3.5 percent to ￥6,010. Nissan Motor, a carmaker that generates 34 percent of its sales in North America, declined 3.5 percent to ￥1,115.
Trading in Taipei was mixed this week, as investors anxiously awaited approval of a proposal to revise the capital gains tax on stock investments. The TAIEX closed the week up 0.6 percent at 8,254.8.
However, by the end of Friday, the legislature failed to pass the proposal before it went into recess, as opposition lawmakers expressed reservations about the Chinese Nationalist Party (KMT)-backed proposal. Norman Yin (殷乃平), an economist with National Chengchi University, said that failure to pass the amendment, aimed at boosting investment sentiment, could cast a shadow over the local bourse.
Hong Kong’s Hang Seng Index declined 1 percent and China’s Shanghai Composite Index added 0.5 percent ahead of a government report on manufacturing data yesterday.
South Korea’s KOSPI rose 1.4 percent, Australia’s S&P/ASX 200 Index dropped 1.1 percent and Singapore’s Straits Times Index slipped 2.4 percent.
In other markets on Friday:
Manila closed 0.99 percent, or 68.6 points, higher from Thursday at 7,021.95.
Wellington rose 0.91 percent, or 40.84 points, to 4,511.35.
Additional reporting by CNA and AFP