Asian shares extend losses on trade, emerging market anxiety

Asian shares extend losses on trade, emerging market anxiety

SYDNEY,. Global equities remained under pressure with stocks in Asia dwn for the sixth straight day today amid fragile investor confidence in the wake of turmoil in emerging markets and anxiety about a major escalation in the US-China trade conflict.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.26 per cent to hit its lowest since mid-August. Japan’s Nikkei slipped 0.58 per cent while Australian shares fell 0.95 per cent.

Investors were focussed on the Sino-US trade war with a public consultation period in the United States ending today on additional US$200 billion (RM827.5 billion) of US tariffs on Chinese goods.

“An escalation of the US-China trade war may be imminent, the timing is somewhat unclear and this justifies caution even given the (US dollar) pullback,” JPMorgan analysts said.

“Conviction and participation will likely remain light until an announcement.”

Measured against a basket of currencies, the US dollar index retreated from two-week highs hit earlier this week to be last down 0.2 per cent on the day.

Overnight on Wall Street, the S&P 500 lost 0.3 per cent and the Nasdaq Composite slipped 1.2 per cent. The Dow was a rare bright spot, up 0.1 per cent.

Investors are also watching for developments as the United States and Canada resume talks about revamping the North American Free Trade Agreement (Nafta). Canada insisted there was room to salvage the pact despite few signs a deal was imminent

The US dollar, considered a safe haven at times of turmoil because of its status as the world’s reserve currency, has generally benefited from these trade uncertainties. It has gained 8 per cent since end-March, with currencies in emerging markets taking a hammering.

The financial crises in Argentina and Turkey have sent shivers in many other emerging markets and in Indonesia the central bank has had to intervene several times in recent weeks to stem the slide in its rupiah currency. The emerging market equity index has been crunched in the past month or so. The index has fallen for five consecutive sessions and is so far down more than 3 per cent this week.

An index of emerging market currencies held near 15-month lows after two straight days of heavy declines.

Analysts at Capital Economics believe there was room for further declines in emerging market equities.

A range of factors have hit EM stocks recently, namely policy tightening by the US Federal Reserve, crises in Turkey and Argentina, Sino-US trade war and broader concerns about China’s economy.

“We doubt that the main factors which have caused equities across much of the emerging world to weaken together recently will go away just yet,” Capital Economics said in a note.

Argentina’s peso gained some respite yesterday as government officials in Washington sought emergency funding to stem an economic crisis. The cash-strapped nation is asking the International Monetary Fund for early disbursements from a US$50 billion standby loan agreed up on in June, which had failed to clear concerns about the country’s ability to pay off its debt

Elsewhere, sterling gained for a second day as investors positioned for a favorable Brexit outcome.

The Australian dollar was a shade firmer at US$0.7206 as sentiment was boosted by stronger-than-expected economic growth data on Wednesday.

The currency is, however, down about 8 per cent so far this year as it is used as a liquid proxy for Chinese and emerging market growth.

In commodities, US crude eased 21 cents to US$68.51 a barrel while Brent was last down 24 cents at US$77.03.

Gold was stronger with spot gold up 0.3 per cent at $1,199.63 an ounce. — Reuters