Japan stocks drop almost 8% as Asia Pacific markets sell off

Japan stocks drop almost 8% as Asia Pacific markets sell off

Stocks in Asia Pacific saw heavy losses in Friday morning trade after shares of Wall Street saw a historic drop overnight, as fears over the global coronavirus outbreak continued to weigh on investor sentiment.

In Japan, the Nikkei 225 was among the biggest losers among the region’s major markets as it dropped 7.97% in morning trade after earlier plunging 10%. The moves followed its Thursday close in bear market territory at 18,559.63 — more than 20% off its 52-week closing high. The Topix index dived 7.2%.

Over in Australia, shares tumbled, with the S&P/ASX 200 down 7.71%. The index fell into a bear market on Wednesday and saw losses of more than 7% on Thursday.

Meanwhile, South Korea’s Kospi also plunged 7.29% while the Kosdaq index fell 11.27%. Hong Kong’s Hang Seng index dropped 4.5%.

Mainland Chinese stocks also declined in morning trade, with the Shanghai composite and Shenzhen component both down more than 2%. The Shenzhen composite also fell 2.518%.

In Southeast Asia, the Straits Times Index in Singapore was 5.02% lower while Malaysia’s FTSE Bursa Malaysia KLCI Index dropped 6.33%. The Jakarta Composite in Indonesia also fell 5.01%.

Overall, the MSCI Asia ex-Japan index fell 4.24%.

“The world’s financial system has become dislocated,” Kim Mundy, currency strategist at Commonwealth Bank of Australia, wrote in a note. “Underlying the big moves is a lack of confidence governments have the right plan to contain the health and economic impacts of the coronavirus.”

Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations.

Tai Hui

Chief Asia Market Strategist, J.P. Morgan Asset Management

“While investors are looking for immediate remedies from governments and central banks, the virus spread has far outpaced the typical reaction time by governments in devising new policies to deal with a largely unprecedented economic and sociacl event,” J.P. Morgan Asset Management’s Tai Hui wrote in a note. “Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations.”

“Investors may be asking, is it time to get back into stocks? Market sentiment will remain jittery in the near term as the COVID-19 outbreak continues to accelerate in the US and Europe,” said Tai, who is chief Asia market strategist. “As we have experienced in China and other parts of Asia, the right policies to contain the outbreak should work but this involves some sharp, short term pain. We are likely to go through such pain in the weeks ahead in the US and Europe.”

Airline stocks dive

Overnight on Wall Street, the Dow Jones Industrial Average closed 2,352.60 points lower at 21,200.62 — its worst drop since the 1987 “Black Monday” market crash, when it collapsed by more than 22%. The S&P 500 also had its worst day since 1987, plunging 9.5% to close at 2,480.64, joining the Dow in a bear market. The Nasdaq Composite ended its trading day 9.4% lower at 7,201.80.

Amid the market washout stateside, the U.S. Federal Reserve announced Thursday new moves to pump in more than $1 trillion into the financial system in an effort to combat potential freezes brought on by the coronavirus.

Meanwhile, the European Central Bank surprised expectations by announcing Thursday that it was not cutting rates. The central bank did, however, announce measures to support bank lending and expanded its asset purchase program by 120 billion euros ($135.28 billion).

— CNBC’s Fred Imbert, Thomas Franck, Jeff Cox and Silvia Amaro contributed to this report.

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