By Dow Jones Business News,
January 29, 2014, 09:45:00 PM EDT
Market turmoil returned to Asia on Thursday, led by a more than 3% slump in Japanese stocks after the U.S. Federal
Reserve said it would scale back further on its stimulus measures.
Although the move to scale back on its monthly buying program was widely expected, it is the latest blow for investors
already dealing with a global selloff. Recent attempts by central banks in Turkey and South Africa to stop the slides in
their currencies have failed to have a significant impact, heightening jitters for money managers.
The Nikkei dived 3.3%, spurred by a stronger yen as investors flocked to the safe-haven currency. In other markets,
Singapore's Straits Times Index lost 1.1%, Australia's S&P ASX 200 fell 1% and Indonesia's JSX was 1.3% lower.
A further knock to global confidence came too with more evidence that manufacturing in China is slowing, pushing Hong
Kong's Hang Seng Index down 1.5% and the Shanghai Composite down 0.7%.
HSBC's final China purchasing managers index for January came out at 49.5, compared with 50.5 in December, and a touch
lower than a preliminary reading of 49.6 from earlier in the month. A score above the 50 mark indicates an expansion in
manufacturing activity, while a reading lower than 50 points toward a contraction. The preliminary reading last week
showed a move from expansionary territory to contraction and was the spark that set off the emerging-market rout, which
started in developing economies and soon spread to their developed peers.
Emerging market "concerns have not left us," said Sean Callow, senior currency strategist at Westpac Institutional
Bank in Sydney, adding that sharp moves in emerging economies can lead to "unexpected collateral damage in the rest of
The declines on Thursday mark a sharp turnaround from the gains that Asia saw in the previous session--the Nikkei
jumped 2.7%, its biggest daily move since early September. On Wednesday, the region moved higher because of initial
optimism after a move by the Turkish central bank to restore confidence in the local currency by yanking interest rates
"The Wednesday market rise was overdone given prevailing global market conditions," said Yoshihiro Okumura, general
manager at Chibagin Asset Management. "The turmoil in emerging markets does not look like it is close to dying down."
The positive impact of the central bank's action was short-lived however, with the effects diminishing as the global
day progressed. By the time the U.S. market had closed on Wednesday, sentiment had soured again and the Dow Jones
Industrial Average ended the day 1.2% lower.
The market turmoil resulted in a stronger yen overnight. The dollar lost 0.7% against the Japanese currency on
Wednesday and weakened on Thursday. It was last at Yen102.14, compared with Yen102.26 late Wednesday in New York.
In corporate news, shares in Lenovo Group sank 6.9% after the Chinese electronics firm said on Thursday that it agreed
to buy Motorola's handset business from Google for $2.9 billion. The acquisition came just one week after Lenovo bought
International Business Machine Corp.'s low-end server business for $2.3 billion. While the first deal gave Lenovo's
stock a boost, the latest acquisition weighed on the company as analysts questioned the profitability of the target.
Write to Brad Frischkorn at firstname.lastname@example.org
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