By Jake Maxwell Watts And Anjani Trivedi
Asian markets ended one of their worst quarters since the global
financial crisis Wednesday, with the double threat of higher
interest rates in the U.S. and China's slowdown unlikely to ease
heading into October.
While calming words from some regional central bankers during
the quarter's last trading day and gains in the U.S. helped stocks
and currencies recover from Tuesday's steep losses, the period was
a bruising one for nearly all of Asia's financial markets.
China's main stock market posted its worst quarter since 2008
and its smaller Shenzhen index, in at least two decades. Markets in
Singapore and Indonesia recorded their worst quarters since the
financial crisis.
Currencies in Asia also are on track for their biggest quarterly
losses in years. Asia's worst performing currency, Malaysia's
ringgit, lost as much as 14% of its value this quarter and is down
26% for the year, while Thailand's baht has weakened close to a
five-year low, with its worst quarterly performance since 2000.
Adding to the gloom, industrial metals, including copper and
zinc have fallen to multiyear lows. Prices for Brent crude oil, the
international benchmark, have halved since this time last year.
"Risk forecasts are turning into a pessimist's paradise," said
Olivier d'Assier, managing director for Asia Pacific at risk
consultant Axioma. "If the risk forecast is low, don't believe it,
and if it's high, it's probably worse than you think," he said.
The surprise devaluation of China's currency in August, after
weeks of roller-coaster stock-market performance, raised the
possibility that a slowdown in the world's No. 2 economy may be
deeper than official data reveals, with a fresh reading on the
factory activity due Thursday. That is a challenge for economies in
the region reliant on Chinese demand for their exports.
Moreover, the prospect of higher interest rates in the U.S.
still looms large, which already has started to draw money from the
region. Investors pulled $40 billion from emerging-market stocks
and bonds in the second quarter, the worst quarterly performance
since the throes of the global financial crisis, according to the
Institute of International Finance.
As foreign investors shed their holdings, yields, which move
inversely to prices, on five-year Indonesian government bonds have
risen steeply this quarter to their highest since 2008, up 1.4
percentage points over the period to 9.591% Wednesday. Malaysian
five-year benchmark yields posted their largest quarterly rise
since early 2011.
While the U.S. Federal Reserve said it would delay raising
interest rates earlier this month--citing instability in China and
other emerging markets, among several factors--that emphasis has
started to recede from more recent comments, leaving the chances of
an increase before year-end on the table.
The dynamic of rate uncertainty and a slowdown in China--one of
the world's biggest consumers of oil, metals and food--has
pressured commodities, too. Many are priced in U.S. dollars, and a
stronger currency on expectations of higher rates has snuffed out
demand as materials got more expensive for global buyers.
Prices of copper--a proxy for consumer demand, since it shows up
in items from refrigerators to televisions--remains close to a
six-year low reached after China's devaluation. The red metal
rebounded by mid-September after some producers announced
production halts, but drifted lower again to $4,915 per ton.
Reports overnight about protests at a Peruvian mine and supply cuts
in Chile helped the metal recover in Asia on Wednesday.
Worries about oversupply and weak Chinese demand also have
pressured prices of zinc, which fell to a five-year low last week.
Zinc is primarily used as an anti-corrosive for steel, of which
China is the largest producer. It is currently trading at $1,680
per ton.
Earlier this week, concerns about the debt load of
mining-and-trading firm Glencore PLC gave investors fresh reasons
to fear the ripple effects of China's waning appetite for
commodities, and sparked heavy selling across global markets.
Shares gained 7.3% in European trading, helping soothe investors'
concerns.
By Wednesday, Asian stocks rebounded from near their lowest
levels this year.
Still, riskier assets such as stocks and corporate bonds could
face more volatility, with prices falling even further, in the
coming quarter.
"Stabilization of global growth, especially China, is much
needed to rebuild investor confidence" if markets are to recover in
the remainder of the year, said Ben Luk, a global market strategist
at J.P. Morgan. "Removing uncertainty essentially means reducing
volatility across risk assets," he said.
In the three months to Tuesday's close, Indonesia's main index
had fallen nearly 15% and China's two main stock markets had fallen
about 30% each.
In the last trading day of the quarter, markets recovered
slightly. The S&P/ASX 200 index in Australia rose 2.1% to
5021.63, while Japan's Nikkei 225 gained 2.7% to 17388.15. Still,
the Nikkei closed out its worst quarter since 2010 and the ASX its
worst since 2011.
In other markets, China's Shanghai Composite gained 0.5% to
3052.78 and the Shenzhen Composite gained 0.3% to 1716.78. Hong
Kong's main index was up 1.4%, South Korea's Kospi gained 1% and
Singapore's FTSE Straits Times Index rose 0.1%.
Most Asian currencies strengthened Wednesday. Malaysia's ringgit
rose as much as 1.5% Wednesday after its central bank governor
allayed investors' worries about a spiraling currency and grim
economic outlook.
Meanwhile, Indonesia's central bank unveiled measures to act in
the forwards market to support its weakening currency, which rose
0.2%.
South Korea's won rose 1.2% in late afternoon trading on the
last day of the quarter.
Brent crude oil was up 0.1% in Asia trade at $48.92 a
barrel.
Later this week, investors will get an update on the U.S. job
market, which could give guidance on the Fed's timeline for rate
increases. On Thursday, China will release manufacturing data for
September, though Chinese markets will close from Thursday through
to Oct. 7 for a national day holiday. Hong Kong's markets will
close Thursday.
Biman Mukherji contributed to this article.
Write to Jake Maxwell Watts at jake.watts@wsj.com
(END) Dow Jones Newswires
September 30, 2015 06:42 ET (10:42 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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