Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Asia Markets Plummet On Pre-Holiday Profit Taking, Ongoing Virus Fears

By MarketPulse (Jeffrey Halley)Market OverviewJan 23, 2020 12:49AM ET
www.investing.com/analysis/asia-markets-plummet-on-preholiday-profit-taking-ongoing-virus-fears-200500814
Asia Markets Plummet On Pre-Holiday Profit Taking, Ongoing Virus Fears
By MarketPulse (Jeffrey Halley)   |  Jan 23, 2020 12:49AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

With Chinese New Year starting tomorrow, bringing in the year of the rat, Asia clearly smells one with regional markets ignoring a positive overnight session on Wall Street and marking equities sharply lower today. The coronavirus outbreak in China is obviously the culprit. The fallout of SARS in 2003 remains at the top of Asian investors’ minds.

News that China has effectively quarantined the entire city of Wuhan – a city of 11 million people and the source of the outbreak – has rattled markets regionally. The timing has been imperfect, to say the least, with hundreds of millions of people moving around China and Asia as a whole, returning home for Chinese New Year. Perfect conditions for a viral spread.

China, however, must be applauded for their proactive approach to controlling the coronavirus spread. China has been open in disseminating its nature, severity and spread. We have come a long way from SARS in 2003. The move lower in Asian markets, therefore, looks more precautionary than panic-driven.

China will be closed tomorrow until the 30th of January. Hong Kong is closed for three days next week, and almost all of Asia will be taking some days off or closed entirely such as Vietnam for Tet. Today then represents the last day for investors to rejigger their portfolios properly ahead of all the market holidays.

It is thus, quite understandable that some money would be taken off the table until the true extent of the coronavirus issue becomes obvious. No one ever went broke taking a profit. The word, therefore, is don’t panic.

Australia has produced a mixed bag of employment data this morning. Headline Employment Change outperformed, rising by 28,900 jobs. That flattered the real story though, with full-time employment falling by -0.30% and part-time jobs increased by a massive 29,200 jobs. Australian employers are clearly hedging their bets and are reluctant to commit to full-time hiring, suggesting that the domestic non-resource economy remains as soft as ever.

The Philippines, in contrast, saw their GDP Growth Rates outperform. GDP for Q4 MoM climbed 2.20%, and the YoY Q4 rose 6.40%, giving further evidence that South East Asia is quietly recovering from the fall-out of the U.S.-China trade war. Assuming China’s coronavirus outbreak does not escalate, South East Asia looks well placed to enjoy a positive Q1 following the underperformance of 2019.

Singapore releases inflation data for December. It is expected to remain stubbornly low YoY, coming as it does before the U.S. and China trade deal sign-off. We expect Singapore inflation to remain persistently low even as growth accelerates in Q1, which is not necessarily a bad thing.

Following Malaysia’s surprise rate cut by 25 bps yesterday, Indonesia announces its latest rate decision today. Bank Negara yesterday decreased rates pre-emptively to give the domestic recovery a little hurry along. Bank Indonesia may well be tempted to take the same approach and shave of 25 bps to 4.75%, as domestic demand remains sluggish and growth stubbornly is stuck at 5.0%. Both the rupiah and ringgit have rallied strongly over the past two months, giving central banks room to ease, a situation reflected right across emerging Asia.

The European Central Bank (ECB) announces its policy decision his evening at 2045 SGT. Rates will remain unchanged at 0.0 % with the quantitative easing programme stable. I find it hard to be bullish about the Eurozone when Greece and Italy can issue government bonds at lower rates than the U.S. Government.

Equities

Wall Street enjoyed a mildly positive day yesterday, led by technology stocks. The S&P 500 rose 0.03%, the NASDAQ rose 0.14%, and the Dow Jones rose 0.03% also. U.S. earnings season is in full swing, and the results have been mostly positive. U.S. stocks though, do appear to be running on empty at these heady heights in the short-term with some sort of correction well overdue. A few surprise downside misses might be just the tonic.

Asia is an ocean of red today as the region locks in profits ahead of the extended Chinese New Year break. With the evolving situation regarding coronavirus in China, investors are erring to the side of caution and lightening portfolios, rather than risking increased downside volatility while on holiday. Reiterating, the moves lower today look more precautionary than panic.

The Nikkei 225 is down 0.70% and the South Korean KOSPI by 0.90%. Singapore’s Straits Times is flat along with Jakarta with Malaysia slightly lower by 0.20%.Mainland China and Hong Kong are where the action is today, though. The Shanghai Composite is down 1.25%, and the CSI 300 is down by 1.15%. Hong Kong’s Hang Seng is lower by 1.15% while Taiwan, surprisingly, is higher by 0.25%, perhaps boosted by tech’s outperformance on Wall Street last night.

Understandably, coronavirus fears have weighed on Greater China exchanges more, but it is also important to note that they will also have the most extended breaks next week. Investors, therefore, will need to manage portfolios more proactively.

Currencies

Currency markets were quiet overnight, although the U.S. dollar rose 0.50% against the Canadian dollar after the Bank of Canada’s dovish unchanged rate decision. Sterling powered through 1.3100 to 1.3150 on the tailwinds of positive data from earlier in the week. Sterling though will struggle to maintain gains above 1.3200 ahead of trade talks with the EU commencing shortly.

In Asia, USD/JPY has fallen to 109.60 as the yen continues to benefit from safe haven inflows ahead of Chinese New Year. USD/CNH rose to 6.9150 ahead of the extended break in China. However, weakness in either the offshore or onshore yuan is likely to be met by a Great Wall of China, in the shape of the PBOC.

Regional Asian currencies have so far refused to buckle in any meaningful way against the dollar on coronavirus fears. In all likelihood, markets will need to see a much wider spread of the viral outbreak, to crack the underlying enthusiasm for the South East Asia recovery story.

Oil

The long-awaited flushing of stale long positioning from the oil pipeline began in earnest last night. Both Brent crude and WTI suffering heavy losses, as nerves over the implications on the consumption of the China viral outbreak broke the will of a very long oil market.

Long positioning packed the emergency exits with Brent recording a 2.80% drop through support at $63.50 a barrel to $56.30 a barrel. Meanwhile, WTI fell through support at $57.50 a barrel, on its way to recording a daily loss of 3.50% at $56.50 a barrel.

The rout has continued today in Asia with Brent crude lower by 0.65% to $62.40 a barrel, and WTI is falling 0.90% to $55.80 a barrel.

The China virus impacts aside, the ball now moves to OPEC+’s court. From here, they will have to decide whether to hold their nerves; hoping this is a short-term clean-out of the long speculators and temporary nerves in Asia. Or whether it is a sign that the world has ample supplies of oil, that even an economic recovery will not be able to suck up.

Gold

Gold rose five dollars to $1462.00 an ounce overnight, supported by haven flows. However, the precious metal has given back all those gains in Asia, trading at $1557.00 an ounce.

The lack of buying in gold is another indicator that Asia’s equity sell-off is more precaution than panic, ahead of the Chinese New Year break. If regional investors were seriously concerned about coronavirus, we would have expected gold to be higher and not lower today.

Gold has support at $1550.00 an ounce which held again overnight. It has resistance at $1564.00 an ounce. Of the two levels, the downside appears to be more vulnerable, which much stale long positioning in the market following the short-lived U.S.-Iran crisis.

Original Post

Asia Markets Plummet On Pre-Holiday Profit Taking, Ongoing Virus Fears
 

Related Articles

Marc Chandler
Central Bank Fest On Tap By Marc Chandler - Sep 19, 2021 2

In terms of central bank meetings, the week ahead is one of the busiest. No fewer than 13 central banks hold policy meetings, divided between six major and seven emerging markets....

Asia Markets Plummet On Pre-Holiday Profit Taking, Ongoing Virus Fears

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email