Hong Kong leads way again in fresh Asia market sell-off
AFP – Asian markets fell again Thursday with Hong Kong suffering a second straight day of heavy losses as investors fret over the impact of protests in the city and plans to introduce a controversial law allowing extradition to China.
Equities were once more deep in negative territory owing to uncertainty over the China-US trade saga and following a tepid inflation report out of Washington, while oil prices were wallowing at five-month lows on supply and demand fears.
Hong Kong’s Hang Seng Index led losses after Wednesday’s demonstrations against the planned extradition law, which many fear will entangle people in China’s courts and hammer the city’s reputation as an international business hub.
While the protests have subsided for now the market was down 1.6 percent in the morning, extending the previous day’s 1.7 percent loss.
And with Beijing backing the law, observers warned the issue could have a detrimental effect on the mainland.
"Beijing’s push for this extradition bill could prove costly as investors and businesses value Hong Kong’s autonomy," said OANDA senior market analyst Edward Moya.
"Uncertainty with Hong Kong’s autonomy will dampen business prospects and put a further strain on Chinese growth. If the US and Europe become involved it could complicate relations and future trade deals."
Hong Kong has also come under pressure from the international community, with the European Union saying the proposed law had "potentially far-reaching consequences for Hong Kong and its people, for EU and foreign citizens, as well as for business confidence in Hong Kong".
– Crude struggles –
Other regional markets were also in the red, with recent optimism that the Federal Reserve will cut interest rates soon — helped by the soft inflation data — unable to soothe investor angst.
Tokyo ended the morning 0.8 percent lower, Shanghai and Singapore each fell 0.6 percent, Sydney was 0.1 percent off and Taipei fell 0.5 percent. Wellington and Manila were also lower.
Energy firms were among the worst hit after oil prices were hammered around two percent Wednesday by data showing a surge on US inventories, which exacerbated ongoing worries about the China-US trade war. Both main contracts were down in early trade Thursday.
Sydney-listed Woodside Petroleum, Inpex in Tokyo and Hong Kong-traded CNOOC all fell more than two percent.
The jump of more than two million barrels of crude — compared with an expected drop of one million — fuelled worries about demand in the world’s top economy and sent both main contracts to levels not seen since January.
"Trade policy uncertainty and floundering demand forecasts continue to hang like an anvil around the market’s neck," said Stephen Innes, managing partner at Vanguard Markets.
"But amplifying the move is the counter-seasonal uptrend in crude stocks, which is showing little signs of reversing."
Hopes that OPEC and other key producers led by Russia will reach an agreement to extend output cuts beyond June are giving limited support to prices, although no date has been set for their meeting due later this month.
"While the group has still to settle on a date for their upcoming bi-annual meeting, members continue to promote the idea of further cuts. UAE said yesterday that the group is close to agreeing to extend cuts," Moya said.
– Key figures around 0300 GMT –
Tokyo – Nikkei 225: DOWN 0.8 percent at 20,958.25 (break)
Hong Kong – Hang Seng: DOWN 1.6 percent at 26,883.86
Shanghai – Composite: DOWN 0.6 percent at 2,829.11
Euro/dollar: UP at $1.1293 from $1.1288 at 2100 GMT
Pound/dollar: UP at $1.2695 from $1.2687
Dollar/yen: DOWN at 108.44 yen from 108.51 yen
Oil – West Texas Intermediate: DOWN 19 cents at $50.95 per barrel
Oil – Brent North Sea: DOWN eight cents at $59.89 per barrel
New York – Dow: DOWN 0.2 percent at 26,004.83 (close)
London – FTSE 100: DOWN 0.4 percent at 7,367.62 (close)