Tsunami hits global equity markets

PETALING JAYA: A severe earthquake and tsunami that hit Japan late yesterday afternoon was the latest shock to send tremors throughout global equity markets, a day after many of them reeled from a sell off on Thursday.

Asian markets, which were lower throughout the day on concerns of political unrest in the Middle East, reacted to Japan’s 8.9 magnitude earthquake in the last hours of trading, accelerating losses.

Meanwhile, equity markets in Europe opened in the red, as the world now waits to assess the damage Japan’s earthquake would have on the global economy and markets.

Global equity markets will remain volatile next week, as the latest incident adds to a series of incidents that will continue to spook investors, which included the political unrest in the Middle East and the resurfacing of euro-zone fiscal woes.

As at press time, a tsunami alert had been issued for New Zealand, the Philippines, Indonesia, Papua New Guinea and Hawaii.

Japan’s Nikkei 225 index closed lower by 1.72% yesterday, hitting a five-week low. Macquarie Group Ltd said in a research report issued yesterday that “inevitably there will be microeconomic disruptions” although the impact would be lower than that of the last major earthquake, Kobe, that hit Japan in 1995. Japanese stocks fell 8% in the week after that quake.

“Despite the scale of the disaster (yesterday), it is hard to find much evidence in the macroeconomic data of the effects of the Kobe earthquake. Industrial production dipped 2.6% month-on-month in January 1995 and then bounced 2.2% in February and a further 1% in March. Gross domestic product growth was 3.4% quarter-on-quarter annualised in first quarter of 1995,” the report said.

Macquarie added that the Japanese currency did not move significantly at the time, although it rose in subsequent months to a peak of just past ¥80 per US dollar in mid-April, but this did not seem to be related to the Kobe earthquake (there was significant trade tension with the US at the time).

“Significant yen repatriation that could push the currency higher and, at an extreme, disrupt global markets, looks unlikely,” it said.

The yen appreciated against all 16 of its most actively traded peers yesterday, with it trading at ¥82.23 per US dollar against its previous close of ¥82.98.

Other regional bourses also extended losses yesterday, with the South Korea’s Kopsi losing 1.31% to 1,955.54 points, Singapore’s STI down 1.04% to 3,043.49 points and Hong Kong’s Hang Seng Index shedding 1.55% to 23,249.78.

US stocks were also expected to extend their losses as US stock-index futures fell.

Crude oil futures for April traded on the New York Mercantile Exchange saw its prices fall below US$100 per barrel for the first time since early this month as the earthquake forced refiners to shutdown processing plants in Japan.

Meanwhile, the benchmark FTSE Bursa Malaysia KLCI fell 1.40% yesterday, its largest single day fall in over two weeks, driven by heavy selling in selected banking, plantation and telecommunication stocks.

The local benchmark index lost 21.29 points to end at 1,495.62 points yesterday, with losers crushing gainers at 678 to 118 and some 207 stocks remaining unchanged. Turnover was 1.02 billion shares done valued at RM1.85bil. The index hit an intraday low of 1,494.13 points.

Analysts said the sentiment on the local and regional bourses were reflective of the sell down in US equities on Thursday.

Among the banking stocks that were heavily traded yesterday include CIMB Group Holdings Bhd, which shed 6 sen to RM7.98, Malayan Banking Bhd lost 9 sen to RM8.71 and AMMB Holdings Bhd fell 10 sen to RM6.36.

IOI Corp Bhd, Sime Darby Bhd, Axiata Group Bhd, Maxis Bhd and Telekom Malaysia Bhd saw large volumes change hands yesterday. Petronas Chemicals Group Bhd, which fell 16 sen to RM6.56 with 27.2 million stocks traded, also dragged down the index.

source: thestar