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G-20 Fever Is Over as Asia Stock Traders Buckle Up for Turmoil

Easy come, easy go. Monday’s 2 percent surge in Asian stocks is now all gone.

What initially started off as investor euphoria after a trade truce from Trump and Xi’s meeting at the G-20 has dissipated in a span of two days. Tuesday’s slump was mainly due to a big sell-off in Japan amid profit-taking and concerns surrounding the lack of clarity around the 90-day trade-war cease-fire. Then U.S. stocks plunged overnight and, by extension, the decline came to Asia.

With the potential for more tweets and statements about the trade truce and plans between the world’s largest economies on tariffs, one thing is clear — volatility, which has spiked this week, is here to stay. Prime examples are the moves in the Shanghai Composite Index and Topix Wednesday: the Chinese benchmark plunged 1.5 percent at the open but pared it to a 0.6 percent drop, while the Japanese benchmark erased more than half of its decline to close 0.5 percent lower.

To be clear, it’s not that there aren’t any good news:

• There are signs emerging from China suggesting that the country is making progress in solving trade tensions: After announcing an array of punishments over intellectual-property theft, the nation said Wednesday that it will quickly implement trade agreement with the U.S.
• China’s services industries expanded in November at a faster-than-expected pace.
• Markit PMI data suggest that emerging markets’ economies have stabilized, and Bloomberg Markets Live blog’s Ye Xie sees this offering some support for more sustained gains in the assets.

But, for now, it looks like none of these can fully alleviate investors’ growing fears over a global economic slowdown, especially when a segment of the U.S. Treasury curve inverted for the first time in a decade. Describing this as a “primary concern” for investors, Tai Hui, chief Asia Pacific market strategist at JPMorgan Asset Management, said the stock market will become more volatile as the U.S. economy get into the late cycle.

“On a risk-adjusted return basis, equities may start to look less appealing than in the past,” he wrote in an emailed note. Here are some other voices on growth concerns:

• In an interview, PT Pinnacle Persada Investama strategist John Rachmat said U.S. recession worries are a much bigger concern than the earlier perceived general slowdown in global economic growth.
• Steve Medina, chief investment officer of global equities at Manulife Asset Management, said technical selling, the yield-curve inversion, continued Brexit worries and uncertainty around future Federal Reserve policy are behind the stock sell-off.
• CMC Markets Singapore analyst Margaret Yang Yan said in an emailed note that “fear of growth slowdown next year against the backdrop of trade uncertainties and rising interest rates has started to erode the foundation of this bull market, spurred hunting for safety and cash.”

In Southeast Asia, Philippine stocks are set to end a two-day rally, even though the country’s inflation started to ease. Singapore’s Straits Times Index also retreated about 0.6 percent. Thailand is closed today.

And for U.S. stocks traders, markets will be closed Wednesday for a national day of mourning to honor former President George H.W. Bush, with futures having a shortened trading session. U.S. economic data will also be delayed, as well as an anticipated testimony to lawmakers by Federal Reserve Chairman Jerome Powell. Click here for more details.

Stock-Market Summary

• Japan’s Topix index down 0.5%; Nikkei 225 down 0.5%
• Hong Kong’s Hang Seng Index down 1.6%; Hang Seng China Enterprises down 1.4%; Shanghai Composite down 0.6%
• Taiwan’s Taiex index down 1.7%
• South Korea’s Kospi index down 0.7%; Kospi 200 down 0.6%
• Australia’s S&P/ASX 200 down 0.8%; New Zealand’s S&P/NZX 50 down 1%
• India’s S&P BSE Sensex Index down 0.6%; NSE Nifty 50 down 0.7%
• Singapore’s Straits Times Index down 0.6%; Malaysia’s KLCI down 0.4%; Philippine Stock Exchange down 1%; Jakarta Composite down 0.5%; Vietnam’s VN Index down 0.2%. Thailand is closed for a holiday.
Source: Bloomberg

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