Extreme Losses in Asian Markets This Season
On Tuesday, most Asian stock markets stabilized following a string of sharp losses due to mounting concerns about an impending recession. In contrast, Chinese markets rebounded on hopes that the government would implement further stimulus measures.
Regional markets had some respite as the dollar’s seven-day surge ended and dropped from 20-year highs. The rise in U.S. Treasury rates also seemed to have stopped. Shanghai Shenzhen CSI 300, a measure of China’s largest companies, increased 0.7%, while the Shanghai Composite index increased 0.8%. Major bank stocks increased as the People’s Bank of China used repo market operations to pump around $24.7B in liquidity into the industry.
The action is part of the central bank’s ongoing commitment to create liquidity and spur economic development. It aims to increase liquidity in the banking system before the quarter concludes.
COVID-19 and Economic Struggles
After several COVID-related lockdown measures this year, Asia’s largest economy is struggling to resume economic development. Data released on Tuesday also revealed a further decline in Chinese industrial earnings in August. Taiwan equities rose 0.4%, while Japan’s Nikkei 225 index rose 0.5%. Following a significant decline during the previous three sessions, regional markets stopped losing ground. However, traders’ concerns about an impending global economic slump kept the mood muted. This week’s risk-heavy markets were severely hurt by weak European economic data and a developing currency crisis in the U.K.
Given their heightened risk exposure, Southeast Asian markets, in particular, saw protracted losses. The worst performance for the day was Philippine equities, which fell 4.5% as investors anticipated that Typhoon Noru would cause long-lasting economic problems. On Monday, the typhoon made landfall in the nation, creating extensive delays due to torrential rain and swift winds.
While Indonesian equities fell 0.5%, Thai stocks fell 0.6%. Wall Street indices, which dropped overnight in choppy trade, also provided a dismal lead-in for Asian markets.
The rate of decline in American equities looked to have eased. Additionally, futures pointed to a possible comeback later on Tuesday. Markets, however, continued to be suspicious of a dead cat bounce because the causes of the previous stock market crash were still at work.
