Asian Stocks Drop on U.S. Election Jitters as Volatility Surges

  • Philippine gauge enters correction after 10% slide from peak
  • South Korean shares extend rout as president names new PM

Election Worries: How to Play the Volatility

Asian stocks fell the most in almost five weeks and volatility gauges spiked amid political turmoil in South Korea and growing angst over next week’s U.S. presidential election. A stronger yen weighed on Tokyo shares.

The MSCI Asia Pacific Index fell 1.1 percent to 138.07 as of 4:29 p.m. in Hong Kong amid a global selloff as finance and consumer companies paced losses. South Korea’s Kospi tumbled to a July low as President Park Geun-hye named a new prime minister and finance minister as she seeks to stem the fallout from a scandal threatening her grip on power. The Philippine stock gauge entered a correction after it sank more than 10 percent from its July peak.

Investors are grappling with political uncertainty at a time when traders see a 68 percent chance that the Federal Reserve will lift interest rates next month. Asia Pacific shares followed declines in the U.S. after an ABC News/Washington Post poll showing Republican Donald Trump with 46 percent support to Democrat Hillary Clinton’s 45 percent. Expectations of market volatility are rising as Clinton’s once dominant lead over Trump withers in the latest polls and turmoil in South Korea sends Park’s approval ratings tumbling.

“The markets’ anxiety levels have moved up a gear,” said Chris Weston, Melbourne-based chief market strategist at IG Ltd. This “suggests the bears have the upper hand, with the buying drying up and funds keeping their cash deployed for more certain times,” he said.

The global equities rout also comes amid central bank policy meetings around the world. The Fed reviews monetary policy Wednesday. The Bank of Japan kept its stimulus program unchanged Tuesday. The Topix index slid 1.8 percent, the most since August, with the yen climbing for a second day against the dollar. The Nikkei Stock Average Volatility Index soared 15 percent. 

In Seoul, the Kospi dropped 1.4 percent, its fourth day of losses. Declines in South Korea, one of the world’s worst-performing equity gauges in the past month, came as President Park nominated Kim Byong-joon, a policy adviser under former President Roh Moo-hyun, as prime minister to take over from Hwang Kyo-ahn. Park apologized last week in a nationally televised address for consulting her friend, Choi Soon-sil, on “some documents” for a certain period after she took office in 2013.

Australia’s S&P/ASX 200 Index fell 1.2 percent, Singapore’s Straits Times Index lost 0.3 percent and Taiwan’s Taiex Index retreated 1.4 percent.

Philippine Correction

The Philippine Stock Exchange Index slumped 2.1 percent to the lowest close since May 10. The gauge sank for an eighth day as concerns that President Rodrigo Duterte’s recent pivot toward China and dismissals of the West will hurt the economy deepened the outflow of foreign funds.

Hong Kong’s Hang Seng Index dropped 1.5 percent and the Hang Seng China Enterprises Index of mainland shares traded in the city declined 1.9 percent. The HSI Volatility Index soared 14 percent. The Shanghai Composite Index fell 0.6 percent.

New Zealand’s S&P/NZX 50 Index lost 1.1 percent and the kiwi dollar climbed after unemployment fell to an eight-year low in the third quarter as the economy boomed, fueling bets that the central bank may be nearing the end of its easing cycle.

E-minis on the S&P 500 lost 0.3 percent. The Fed is due to review policy on Wednesday, with some analysts saying a Trump victory would decrease the chance of an interest-rate increase next month.

Gold producers were the standout winners after the price of the precious metal climbed to a one-month high. Regis Resources Ltd. jumped 7.1 percent and Newcrest Mining Ltd. advanced 2.5 percent in Sydney trading.

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