Asian stocks have dropped down to very poor numbers, reaching their lowest point in 11 months this Wednesday. This dampers the stock market outlook considerably. We saw a number of movements in US markets as well, with futures dropping and Treasury yields surging up again. Now, investors fear interest rates could stay near their high points.
The most stark indicator of the health of Asian markets would be the MSCI index for the Asia-Pacific region. This index showed a 1.5% drop in share value across the region (excluding Japan), including emerging market stocks. In Japan itself, the Nikkei fell down by 2%, due to the shares of chip companies suffering. It seems like the region is suffering as a whole.
US Treasury yields will likely have an effect on both US and Asian markets. 10-year Treasury yields reached 4.96% this Thursday, threatening to overshoot the 5% point again. These yields have an effect on yields across markets worldwide. If the bonds blow past the 5% point, analysts expect Asian markets to feel significant volatility.
When Treasury yields calm down, then it will be easier to make predictions on earnings in companies and subsequently where it would be best to put investments.
China has started to see some positive news as of late with the announcement of a stimulus into the economy, with a trillion yuan debt plan. However, optimism here proved to be temporary, as both Hong Kong and Shanghai shares slowed down their gains. In fact, the Hang Seng suffered a 0.6% loss in value as we see many volatile stocks in this area. The stock market outlook in China, due to recent economic woes and this slow down, is likely to be poor for the foreseeable future.
One positive story is actually the South Korean economy. Its last quarter proved to show some resilient growth according to recent reports. It seems exports have been growing, bolstering economic resilience in the country. This export success convinced South Korea’s central bank not to shift interest rates for now. However, the Korean won still suffered due to the dollar gaining in value yet again.
