Grim milestones flash across Asian stocks as risk-off takes hold

Grim milestones flash across Asian stocks as risk-off takes hold

Asian stocks tumbled as fears of a deeper US economic slowdown, an extended rout in Japanese shares and rising tensions in the Middle East sparked an exodus from risk assets.

Many equity indexes across the region stared at bleak milestones on Monday, with Japan and the tech-heavy markets of Taiwan and Korea bearing the brunt of the selloff — their benchmarks sank more than 7% each. The MSCI Asia Pacific Index plunged as much as 4.3%, on track for a technical correction and poised to erase all its gains for the year.

Heavyweight Taiwan Semiconductor Manufacturing Co. headed for a record drop, while financial and industrial shares were the other big drags on the regional benchmark.

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. 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 8% each 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.

South Korea’s benchmark Kospi Index slid over 7% 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.

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%.

“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.