A few key Asian markets managed to rebound on Friday after falling into corrections and bear markets this week, but the sense of angst remained palpable.
South Korean officials felt compelled to publicly describe recent declines in local equities as “excessive.” Financial Services Commission Chairman Koh Seungbeom characterized anxiety among investors as “unfavorable” considering the economy’s robust fundamentals.
The FSC held a meeting on Thursday “to review financial market risks.” “Even though the Fed’s recent announcement was largely in line with market expectations, US stocks fell and the stock market volatility is continuing in domestic markets as the Fed Chairman’s press conference was taken to be hawkish,” South Korea said, adding that “financial market volatility appears to be unavoidable for some time due to a number of different factors, such as the accelerated pace of tightening in the US, spread of the Omicron variant, slowdown in China’s economic growth and the Russia-Ukraine conflict.”
It’s necessary, South Korean officials reckoned, “to closely monitor markets to prevent anxiety from spreading excessively when exports and growth indicators are standing strong.”
Don’t chuckle. The Kospi’s recent declines are dramatic. South Korean shares are off to their worst start since 2008. The won is the weakest since July 2020. And Kim Jong Un just had his “busiest” month ever when it comes to randomly firing unidentified projectiles into the ocean.
The Bank of Korea will convene a meeting on February 3 to review the situation. A bevy of Asian markets will be closed next week for holidays.
In China, the Party is anxious about its own bear market. Local media ramped up the rhetoric Friday, with all three state-controlled securities-focused newspapers running front-page commentaries on stocks.
If you ask China Securities Journal, the selloff makes mainland shares more attractive for long-term investors. Shanghai Securities News was keen to note that dozens of companies have announced buyback plans in January, a reflection of their confidence in the outlook. And the Securities Times lauded fund managers for recognizing their important responsibility as “anchors” for the market by purchasing their own products and thereby “setting a good example.” (That you can chuckle at freely.)
One problem: Xi simply refuses to give anyone a break from his rolling regulatory blitz. “Investors remain vulnerable to the Communist Party’s opaque and unpredictable policy making,” Bloomberg’s Sofia Horta e Costa wrote, in a piece that’s worth reading. “Hopes that Beijing was nearing the end of a crackdown on the technology sector were dashed when China vowed to curb the influence of such companies in a sweeping communique on corruption,” she added, on the way to noting that “optimism that Beijing was dialing back on its property crackdown has been replaced with skepticism, there’s still nervousness over the future of tutoring companies [and] a new nationwide campaign on money laundering has raised more uncertainty over where the government will strike next.”
Securities officials and the PBoC may be determined to prevent a meltdown, but Xi’s quest to rein in capital run amok continues unabated. In many respects, it’s at cross purposes with efforts to buoy markets and bolster sentiment.
A strategist at Lombard Odier called the selloff in regional shares “rather indiscriminate” and “slightly overdone,” on Friday.
Asian markets, the group reckons, will probably move “higher in the rest of the year once [they] digest the impact of policy tightening — even if there are initial volatilities.”
Panic Selling Grips Asia As Stocks, Bonds Plunge On Hawkish Powell
The Bear Beckons In Asia As Shares Succumb To Fed, Inflation Fears