Asian Stocks Tumble as Hong Kong, Taiwan Sink Into Bear Markets

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Asian stocks headed for their worst week since September 2011 as Indonesia, Hong Kong and Taiwan entered bear markets.

The MSCI Asia Pacific Index sank 2.3 percent to 131.18 at 5:32 p.m. in Hong Kong, headed for its lowest close since February 2014 and a 5.1 percent weekly decline. The Jakarta Composite Index closed 2.4 percent lower, bringing its drop from an April peak to 22 percent. The Hang Seng Index lost 1.5 percent, while Taiwan’s Taiex index sank 3 percent.

China’s surprise devaluation of the yuan last week and prospects for the first U.S. interest-rate increase since 2006 triggered a selloff in emerging markets and commodities that’s spreading to developed markets. The Standard & Poor’s 500 Index fell the most in 18 months on Thursday.

“It seems like we’re seeing the makings of the 1997 Asian financial crisis all over, with emerging-market currencies plunging,” Nicholas Teo, a strategist at CMC Markets in Singapore, said by phone.“China’s knock-on effect on the rest of the world is huge and China’s deepening economic slowdown will have an impact for the next couple months or so. We are getting closer to a Fed rate hike. If they move, that will have disastrous effects.”

Manufacturing Slumps

A report Friday showed a private gauge of Chinese manufacturing unexpectedly fell to the lowest level in more than six years, suggesting the world’s second-largest economy will need further policy support to stem a deepening slowdown. Concern that demand is weakening has driven a commodities rout that’s erased $2 trillion from the value of mining and oil companies since the middle of last year.

BHP Billiton Ltd., the world’s biggest mining company and Australia’s largest oil producer, slipped 1.2 percent in Sydney as commodities from copper to oil extended their rout. Sinotrans Ltd. tumbled 9 percent in Hong Kong after Daiwa Securities Group Inc. downgraded its rating on the logistics company. Takeda Pharmaceutical Co. slumped 3.1 percent in Tokyo after the drugmaker lost a court ruling that could shave years off a patent on its top-selling cancer drug.

Hong Kong’s Hang Seng Index slipped 6.6 percent this week, the most since September 2011, as declines in mainland equities and the devaluation of the yuan erode support for the city’s shares. The Hang Seng Properties Index dropped for a 13th day, the longest stretch on record, raising concern the city’s real estate market is overvalued. Cheung Kong Property Holdings Ltd. tumbled 3.6 percent, the third-biggest decline on the HSI.

Indonesia’s economy is growing at the slowest pace in six years as President Joko Widodo struggles to deliver on plans to revitalize growth. The weakest rupiah in 17 years is limiting scope for the central bank to cut interest rates, while tumbling commodity prices and a deepening economic slowdown in China threaten to slash export revenue.

Taiex Slides

The Taiex’s drop on Friday took its slide from an April 27 peak to 22 percent, on concern a deepening slowdown in the Chinese economy will curb demand for the island’s technology products. Taiwan is already facing its own domestic woes, with the economy growing at the slowest pace in three years and overseas shipments slumping for a sixth month. Taiwan Semiconductor Manufacturing Co., which plunged 4 percent on Friday, said in July it may post its first revenue decline in almost four years.

The Shanghai Composite Index dropped 4.3 percent, extending the first weekly loss in three weeks. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong slumped 2 percent. Chinese stocks fell this week after the securities regulator indicated a week ago that the state will reduce buying and data showed the richest traders were cashing out.

Regional Markets

South Korea’s Kospi index fell 2 percent. Japan’s Topix index slumped 3.1 percent. Australia’s S&P/ASX 200 Index slid 1.4 percent. New Zealand’s NZX 50 Index added 0.2 percent. Singapore’s Straits Times Index lost 1.3 percent.

E-mini futures on the Standard & Poor’s 500 Index added 0.1 percent. The underlying measure sank 2.1 percent on Thursday, falling out of a 70-point trading range that had held for most of the year.

“The overnight weakness in global markets is making people nervous,” Angus Gluskie, managing director at White Funds Management Pty in Sydney, who oversees $550 million, said by phone. “The biggest concern among investors right now is the market volatility in China that shows investors are increasingly concerned about the health of the Chinese economy and how that might impact the rest of the world.”

‘Expecting Correction’

Greek Prime Minister Alexis Tsipras announced he will step down with an eye to snap elections, a move the embattled leader will likely use to shut out dissenters and return to power with a more manageable coalition.

“We’ve been expecting a correction and it looks like we’re getting one,” said Mark Lister, head of private wealth research at Craigs Investment Partners Ltd. in Wellington, which manages about $7.2 billion. “The S&P had held up, now it’s back in negative territory. The whole world’s looking a little bit sad. China still looks really worrying on a number of fronts.”

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