This Is How the Stock Rout Hit Asia, Erasing Nikkei's 2018 Gains

Global Equity Slump Deepens as Rate Fears Grow

The weekend did little to cushion the blow of the biggest U.S. stock rout in two years, with Asian equities facing a barrage of selling as Monday trading got under way.

Japan bore the brunt of the declines, with Nikkei 225 Stock Average erasing this year’s gain, while a measure of its volatility surged to the highest since November. U.S. equity futures sank as much as 1.1 percent in Asia today but by 7:35 a.m. in London March e-mini contracts on the S&P 500 Index had pared losses to 0.1 percent.

Here are charts that illustrate Monday’s drop as Asian stocks head for their biggest decline in a year. The MSCI Asia Pacific Index slid 1.4 percent, retreating from a rally that has sent equities to overbought levels for most of January.

Asia Equity Slump

Key markets across the region tumbled into negative territory

Source: Bloomberg

Note: Pricing as of 2:40 p.m. in Hong Kong.

Bearish sentiment wiped out the year-to-date gain of Japan’s Nikkei 225 Stock Average. The gauge retreated below a 76.4 percent-retracement point from a high in January 2018 to a low in April 2017. Its next key Fibonacci-retracement level stands at 21,873.76. The Nikkei closed 2.6 percent lower to 22,682.08, while the Topix declined 2.2 percent to 1,823.74.

The Nikkei 225 also dropped below its 75-day moving average line, breaching a “strong support” level, said Yoshihiro Ito, chief strategist at Okasan Online Securities Co. in Tokyo. The plunge signals a “prolonged” correction, he said.

Winners to Losers

Some of 2017's top names led losses in Asia equities Monday

Source: Bloomberg

Note: Pricing as of 3:27 p.m. in Hong Kong.

Technology stocks, which helped fuel much of the rally in stocks around the world last year, were among the chief culprits of today’s selloff. The MSCI Asia Pacific Information Technology Index dropped as much as 2.5 percent, set for its worst one-day slide since November 2016, as Tencent Holdings Ltd., Taiwan Semiconductor Manufacturing Co. and Keyence Corp. all weighed on the gauge.

It’s not all doom and gloom for investors in the region with Sony Corp. one of the few winners on the day, climbing 1.5 percent to the highest close in two weeks. The electronics giant extended gains a fourth day after boosting its annual profit forecast to a record Friday amid strong profits in its music division and better sales of high-end TVs.

Even as volatility gauges spiked throughout the region, volatility levels still remained near multi-year lows compared to its historical chart, signaling that investors may still be able to stomach the swings in the market. The 30-day volatility gauge for the MSCI Asia Pacific gauge rose to the highest level in a year amid concern over surging U.S. Treasury yields.

The MSCI Asia Pacific Index remains well above its trend line, suggesting its bullish trend may still be intact. Recent losses come after index stayed overbought for most of last month, according to the relative strength index.

For more on Asian stocks, read:
Bulls Go Missing as Global Equities Buckle From U.S to Japan
JPMorgan Says This Isn’t Start of Major Downturn Amid Bond Risk

— With assistance by Abhishek Vishnoi, and Keiko Ujikane

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