Monday, December 23, 2024

Asian stocks rally a day after worst crash since ‘Black Monday’

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Tokyo stocks surged over 10 per cent on Tuesday, recovering from a record selloff the previous day driven by concerns about the US economy and a stronger yen.

The benchmark Nikkei 225 index soared 10.33 per cent, gaining 3,249.36 points to reach 34,707.78, while the broader Topix index rose 10.26 per cent, adding 228.49 points to close at 2,455.64.

In South Korea, Kospi opened sharply higher on Tuesday, gaining 4.35 per cent to reach 2,547.66 in the first 15 minutes of trading, recovering from its largest daily loss of nearly 9 per cent on Monday due to US recession fears and weak big tech performance.

A sidecar order was issued at 9.06am to halt programme purchasing after the Kospi 200 index rose over 5 per cent for more than a minute, Korea JoongAng Daily reported.

Major stocks in Seoul started positively, with Samsung Electronics, SK hynix, LG Energy Solution, Hyundai Motor, LG Chem, and SK Innovation all posting significant gains. The local currency also strengthened slightly against the dollar on Tuesday.

This potentially marks a recovery in battered Asian markets a day after Nikkei closed at 31,458.42, dropping 4,451.28 points as it entered bear market territory.

On Tuesday, the Nikkei index jumped more than 8 per cent, reaching above 34,000 in the first few minutes of trading, sharply rebounding from its previous close of 31,458.

Tokyo’s Nikkei index finished Monday with a 12 per cent loss, the largest one-day drop since the aftermath of “Black Monday” in October 1987, when a stock market crash stripped nearly 15 per cent off this index and 20 per cent off the S&P 500.

The rally was supported by calming statements from central bank officials, which eased investor concerns, The Japan Times stated.

Wall Street futures also showed signs of stabilisation, with S&P 500 futures up 0.9 per cent and Nasdaq futures rising 1.2 per cent, recovering from Monday’s losses.

Currencies and Treasury yields also showed signs of recovery, according to Reuters.

The dollar edged up to 145.64 yen after a sharp drop on Monday, while it regained ground against the Swiss franc.

“After the breathtaking and historic moves seen across Asian markets yesterday, driven predominantly by a significant liquidation of margin positions, we look for a solid counter rally on open today,” Chris Weston, head of research at broker Pepperstone told Reuters.

An electronic quotation board displays share price on the Tokyo Stock Exchange in Tokyo on 6 August 2024. Tokyo stocks bounced back in early trade on 6 August following a historic selloff on worries over the US economy and a stronger yen
An electronic quotation board displays share price on the Tokyo Stock Exchange in Tokyo on 6 August 2024. Tokyo stocks bounced back in early trade on 6 August following a historic selloff on worries over the US economy and a stronger yen (AFP via Getty Images)

He, however, added: “After such a furious shake-out of leveraged positioning, with Japanese banks absolutely taken to the cleaners, it will take the bravest of investors to buy with any conviction.”

The Bank of Japan raised interest rates last week for the second time in 17 years, with speculation about another rate hike forthcoming, while the U.S. Federal Reserve has hinted at a potential rate cut as early as September.

“Gauging the bottom of such historic selloffs is complicated and investors will most likely remain cautious before pouring capital back into equity markets,” Boris Kovacevic, Austria-based global macro strategist at payments firm Convera.

“However, the dollar-yen pair has now fallen 12 per cent since peaking five weeks ago and is in highly oversold territory. The yen is therefore vulnerable to any upside surprises in U.S. macro data leading investors to reconsider the recession trade. This would help Japanese equities stabilise,” he said.

Meanwhile, in India, after suffering 3 per cent losses, Indian stock benchmarks Sensex and Nifty 50 rebounded sharply on Tuesday. Sensex rose over 1 per cent to 79,852.08, and Nifty 50 climbed over 1 per cent to 24,382.60 in early trading. Mid and small-cap segments reportedly saw even stronger gains, with indices jumping 2 per cent each.

On Monday, Taiwan’s stock exchange held an urgent press conference to calm investor fears after major Asian markets, including Taiwan’s, experienced significant plunges. Taiwan’s stocks fell over 7 per cent in morning trade, with tech shares like TSMC taking a major hit.

South Korea’s Kospi fell over 7 per cent, and Singapore’s Straits Times Index and Australia’s All Ordinaries declined by more than 3 per cent in the Monday horror show.

Additional reporting with agencies

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