Asian markets sink as oil prices continue to fall

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Asian markets sink as oil prices continue to fall

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Asian stocks plummeted as the rout in oil spurred a global sell-off of risk assets on Wednesday.

Seoul’s main bourse sank below the 1,900 level to close at 1,890.67, down 15.93 points, or 0.84 percent, from the previous trading day.

Japan’s Nikkei ended its rally after the Bank of Japan’s recent interest rate cut and fell nearly 3 percent on Wednesday. The Shanghai composite index and Hong Kong Hang Seng index dropped around 0.4 percent and 2 percent, respectively. The Taiwanese market also tumbled nearly 1 percent.

Reports on Tuesday that North Korea told the International Maritime Organization that it would launch a long-range rocket only made things worse in Seoul.

Foreign investors, who tend to be more sensitive to North Korean threats, withdrew from the local market and sold 193.1 billion won ($158.5 million) worth of stock on Wednesday, the most in six trading days.

Still, Wednesday’s losses were limited largely thanks to retail investors, who bought 123.1 billion won in shares.

“The Kospi fell more than 2.5 percent this month due to investors withdrawing from risk assets,” said Jung Yu-jung, an analyst at Mirae Asset. “However, the local market is hanging pretty well in the global market, where developed markets fell 6.1 percent and emerging markets dropped 6.5 percent in the same period.

“Korea’s growth rate for this year is estimated at 1.9 percent, which is lower than the 3 percent estimates for last year. There aren’t that many good signs to attract more investors.”

Some experts argue that Korea has become less volatile, considering the news coming from China recently.

“Chinese markets’ impact on the local bourse has been reduced, and the Kospi now moves in line with crude prices,” said Lee Hyun-joo, an analyst at NH Investment and Securities. Lee noted that events in the Chinese markets, from the circuit breaker mechanism suspending trading to small gains and losses, are not affecting the local market as often as they did earlier this year.

Global benchmark Brent crude fell 4.4 percent to $32.72 a barrel and West Texas Intermediate crude dropped 5.5 percent to $29.88 a barrel, the lowest in two weeks, on Tuesday.

The fall in crude prices came after Russia and members of the Organization of the Petroleum Exporting Countries made the decision not to cut their oil output. The countries want to see how Iran, which has seen various sanctions against it lifted recently, might affect the global oil market, according to various media outlets.

“Crude prices will go up eventually, and its impact on the global market will be reduced,” said Ma Joo-wook, an economist at Kiwoom Securities. “Regardless of many negative factors surrounding the local market, the Kospi trading below the 1,900 level can be an opportunity for some investors, which will allow them to buy stocks for cheaper prices.”

Korea’s won dropped 1 percent to close at 1,219.30 a dollar, while the Japanese yen, a safe-haven currency, strengthened on Wednesday.


BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]

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