The global sell-off has tipped Asian stocks into a bear market

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  • The MSCI Asia Pacific Index was battered on Thursday, slumping 2.2%. It’s now fallen by more than 20% from its 2018 highs, thus falling into bear market territory.
  • The ASX, TOPIX and Kospi all fell by more than 2%. Chinese stocks are faring better in late trade.
  • There wasn’t a specific catalyst for the overnight selloff, although some analysts pointed to weak Eurozone PMI data as a factor which weighed on sentiment.

Asian stocks have entered a bear market, falling over 20% from the highs struck in late January this year.

The losses across the region were massive, equal to — or in some cases larger than — those seen in the United States overnight.

Investing.comMSCI Asia Pacific Chart

The MSCI Asia Pacific Index — comprising large and mid cap representation across five Developed and nine Emerging Markets countries in the Asia Pacific region — was down 2.2% in late trade, extending its decline from the year-to-date high on January 29 to 20.5%.

Australia’s ASX 200 Index slumped 2.83%, closing at the lowest level in over a year. It’s now down more than 10% from its 2018 highs, entering a technical correction in the process.

The losses were similar in key Asian markets with South Korea’s KOSPI index finishing down 2.05%. In the year to September, the South Korean economy grew by 2%, the lowest level since the tail end of the global financial crisis. Construction investment during the quarter fell at the fastest pace since 1998.

Japan’s TOPIX was the hardest hit of the major markets, slumping 3.1% with falls exacerbated by overnight strength in the Japanese yen as capital flowed into safe-haven assets.

After tanking at the start of trade, Chinese stocks recovered losses in the latter parts of session. With less than a hour to the close, China’s benchmark Shanghai Composite index currently sits down 0.55%.

The losses in indices dominated by small-cap stocks have been significantly larger, along with markets in Hong Kong with the Hang Seng off 2.1%.

The slide in those markets were mirrored across the broader region, as seen in the scoreboard below as at 5.15pm AEDT.

Australia ASX 200 5664.10 , -2.83%
NZ NZX 50 8568.23 , -0.86%
Japan TOPIX 1600.92 , -3.10%
Shanghai Comp 2589.00 , -0.55%
Shenzhen Comp 1274.18 , -1.78%
HK Hang Seng 24721.79 , -2.09%
Sth Korea KOSPI 2054.26 , -2.07%
Sinagpore STI 2989.56 , -1.40%
Taiwan TAIEX 9520.79 , -2.44%
Philippines PSI 6956.62 , -2.42%
Indonesia JKSE 5711.57 , 0.04%
Malaysia KLCI Index 1676.09 , -0.83%
Thailand SET 1604.85 , -1.14%
India Nifty 50 10107.5 , -1.15%
S&P 500 Futures 2671.25 , 0.26%

Only the Jakarta Stock Exchange in Indonesia, and S&P500 futures in the US, are trading higher at this point.

Suggesting the rout in Asia will continue into European trade, stock futures across the region are currently down between 0.4% to 2.7%.

Italian stock futures are pointing to a drop of 1.6% on the open.

Today’s price action follows a sharp selloff on US markets overnight, as the S&P500 declined for the sixth straight session while the tech-focused NASDAQ index had its biggest daily fall since 2011.

A report from IHS Markit — revealing activity levels across the Eurozone’s private sector grew at the slowest pace since late 2016 in October — was cited by some analysts as possible factor behind the latest selloff.

“The pace of Eurozone economic growth slipped markedly lower in October, with the flash purchasing mangers index setting the scene for a disappointing end to the year,” said Chris Williamson, Chief Business Economist at IHS Markit.

“The survey is indicative of GDP growth waning to 0.3% in the fourth quarter, and forward-looking indicators, such as measures of future expectations and new business inflows, suggest further momentum could be lost in coming months.

“The survey will make for uncomfortable reading at the ECB.”

Others suggested that it was a confluence of existing factors that drove the latest selloff.

“If people are struggling to find a driver I suggest, they wake up and smell the coffee,” said Stephen Innes Head of APAC Trading at OANDA.

“The catalysts are nothing new — tariffs, Italy, Brexit, Saudi Arabia.”

“But the towering pillars of market strength, the US equity market, is looking ever so fragile and on the verge of crumbling.”

“The air is so thick with a sense of foreboding that you can cut it with a dull butter knife. Maybe there are too many things going sideways clouding investor judgement, but things could turn nasty in a heartbeat.”

NOW READ: The ASX is falling as the global stocks sell-off rolls in to Asia

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