Warning Signs Flash as Asian Stocks Plunge: Is It Time to Panic?

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(Bloomberg) — Asian stocks tumbled at the start of a new week as fears of a deeper US economic slowdown and rising tensions in the Middle East prompted investors to shun risk assets.Most Read from BloombergEquity gauges across the region stared at bleak milestones early on Monday, with Japan and the tech-heavy markets of Taiwan and Korea bearing the brunt of the selloff. The MSCI Asia Pacific Index plunged as much as 3.8% following a similar decline on Friday, with financial shares another major drag.Monday’s rout brought the regional equity benchmark a whisker away from erasing it gain for the year, while its slide from a July 11 peak approached the 10% mark — which would signal a technical correction.The flight to safety has intensified after weak US economic data spurred concern that the Federal Reserve may have been behind the curve in cutting rates and will now likely need to ease monetary policy aggressively to head off a recession. Meanwhile, geopolitical tensions in the Middle East also sapped risk appetite as Israel braced for a possible attack from Iran and regional militias in retaliation for assassinations of Hezbollah and Hamas officials.This “feels more like a global equities risk off in general and the profit taking is being done in sectors or geographies that have done well,” said Vey-Sern Ling, managing director at Union Bancaire Privee.In Japan, the Topix and Nikkei 225 gauges slid more than 7% each in early trading as investor confidence crumbled on a surge in the yen, tighter monetary policy and broader concern about the US economy. The declines drove recent losses for the two indexes to more than 20% each, putting them on track for bear markets.Taiwan Semiconductor Manufacturing Co., the largest stock on the MSCI Asia gauge by market value, lost more than 7%, dragging the Taiex lower with it. South Korea’s benchmark Kospi Index slid over 5% as the rotation away from tech-heavy markets intensified. The Kospi also took its losses from a July 11 peak to more than 10% to head for a technical correction, with data showing that foreign investors led Monday’s selloff.A circuit breaker halted trading of Topix futures for about 10 minutes, while Korea’s stock bourse also temporarily halted sell orders for program trading in the Kospi after futures on the Kospi 200 Index plunged more than 5%.Story continues“Sentiment toward stocks will likely remain fragile for now as the market debate will likely remain on US soft-landing versus a recession, with the next major labor market report a month out,” said Chetan Seth, an Asia-Pacific equity strategist at Nomura Holdings Inc.Sectors to WatchMarkets at a GlanceMSCI Asia Pacific Index falls 3%Japan’s Topix Index falls 5.7%; Japan’s Nikkei Index declines 4.6%China’s CSI 300 Index was little changed; Hong Kong’s Hang Seng Index declines 0.5%; Hong Kong’s Hang Seng China Enterprises Index falls 0.7%Taiwan’s Taiex Index falls 6.7%South Korea’s Kospi Index declines 5.4%; South Korea’s Kospi 200 Index falls 5.8%Australia’s S&P/ASX 200 Index falls 2.7%; New Zealand’s S&P/NZX 50 Gross Index declines 1.7%Singapore’s Straits Times Index falls 2.8%; Malaysia’s KLCI Index declines 2.4%; Philippines’s PSEi Index falls 2.1%; Indonesia’s JCI Index falls 2.1%; Vietnam’s VN Index falls 1.5%10-year Treasury yield declines 0.8 basis pointsBloomberg Dollar Index falls 0.1%West Texas Intermediate crude rises 0.6% to $74 a barrelEuro rises 0.1%Here Are the Most Notable MoversLY Corp. shares jump as much as 9.5% after the operator of Japan’s biggest messaging app said it plans to buy back up to ¥150 billion ($1 billion) worth of its own shares.Nintendo shares plunge as much as 13%, the most since July 2016, after the company reported operating income for the first quarter that missed the average analyst estimate, with some looking further ahead for demand to pick back up starting from the second quarter.Mitsubishi UFJ Financial Group shares fall as much as 21% in Mon. morning trading, its biggest intraday decline on record.Related Market NewsTaking Stock: Last week’s rate hike in Japan hammered the benchmark index the most in eight years. Despite the turmoil, some investors still have faith in the long-term outlook for the country’s stocks.Global Wrap: A global stocks selloff deepened on Monday as concerns grew that the Federal Reserve is behind the curve with policy support for a slowing US economy, sending investors into the safety of bonds. Japanese shares plunged as traders priced in more domestic rate hikes.OPTIONSTrip.com, Sinopharm, Sands China, CCB: Hong Kong Options WrapPosco Holdings, Hyundai Motor: South Korea Options WrapThis story was produced with the assistance of Bloomberg Automation.Most Read from Bloomberg Businessweek©2024 Bloomberg L.P.