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Asian Markets at Close Report

European Markets at Close Report

Jun 24, 2016

Asian Markets at Close Report, by MarketWatch on June 24, 2016: Asian Markets Plunge on Brexit; Nikkei Has Worst Day in 5 Years

marketwatch.com
 
Chao Deng 
 
HONG KONG — Britain’s vote to leave the European Union sent reverberations through Asian markets on Friday, where investors were the first to react as it became clear a shock result was in the offing.

Traditional safe-haven assets like the yen and gold jumped higher, but Japanese shares led a slump in regional stock markets. The Nikkei Stock Average NIK, -7.92% closed down 7.9%, its steepest one-day loss for five years.
While the U.K. isn’t a huge export market for most Asian countries, several companies in the region have made heavy investments there.
In Japan, industrial conglomerate Hitachi 6501, -10.29%  dropped 10.3%, while advertising agency Dentsu 4324, -12.50%  slumped by 12.5%, and auto maker Nissan Motor 7201, -8.10%  fell 8.1%.
Hong Kong-listed shares in British banks HSBC PLC 0005, -6.59%  and Standard Chartered PLC 2888, -9.48%   dropped by 6.6% and 9.5% respectively, leading the Hang Seng Index HSI, -2.92%  down 2.9%.
Investors were gripped by broader fears about global growth on the back of the U.K.’s ”Leave” decision. The British pound was the biggest casualty, dropping to its lowest level in more than 30 years against the U.S. dollar. Oil prices slipped back by around 4%.
Elsewhere, there was a flight to safety. Gold GCQ6, +4.73%  rose above $1,300 a troy ounce, up over 4%. The yield on the Japanese 10-year government bonds TMBMKJP-10Y, -40.09%  meanwhile dropped to minus 0.199%, close to its record low reached earlier this month, while the yield on 30-year government bonds TMBMKJP-30Y, -33.57%  slid to a historic low of 0.132%, according to Reuters. Bond yields move inversely to prices.
“It’s not just a U.K. story now,” said Ludovic Colin, a senior portfolio manager at Vontobel Asset Management Inc.
While most fund managers had said they hadn’t ruled out a “Leave” scenario ahead of the referendum, there had been a tilt toward bets on a vote for “Remain” in recent days, according to bookmakers and opinion polls. As tallies trickled in throughout the Asian trading day, investors across the region had to quickly change their expectations.
“When I came in this morning it looked as if the market had decided it was a done-and-dusted deal, and the U.K. was going to vote for a landslide ‘Remain,’ despite the polls showing it was going to be a close-run thing,” said Stuart Ive, a private client manager at OM Financial in Wellington, New Zealand.
However, as results started coming in it became clear just how “exceptionally close” the vote would become. “Things are a lot closer than these markets had priced in.”
Asia markets in turmoil after Brexit vote
Stocks in Japan suffered their worst day in five years and the British pound plummeted to its lowest level in around 30 years after the U.K. voted to leave the European Union.
Japan’s currency, the yen USDJPY, -2.95%  , reached its strongest level since November 2013, at 99 yen to the U.S. dollar during the Asian morning, though it fell back later in the day. The move in the yen prompted Japan’s top currency official, Masatsugu Asakawa, to say that the authorities there would consider responses as needed.
“At least half of the market was anticipating the U.K. to remain,” said Ichiro Yamada, general manager of the equities department at Fukoku Mutual Life Insurance.
Traders skipped breakfast and stayed glued to their screens through lunch time as the drama in markets unfolded.
Stephen Innes, a senior trader at Oanda Asia Pacific, arrived early Friday morning to his trading desk in Singapore. “I was in about 3:30 a.m., so I was actually 30 minutes late,” he joked.
For the next several hours, a colleague brought him coffee about every 15 minutes as he handled calls for market comments and online client orders.
“The shifting sentiments are quite exciting for traders,” he said.
Later, as most Asian markets were closing, the damage looked set to spread through global markets. Futures in the U.S. pointed to a drop of nearly 5% for the S&P 500.
“Meltdown maybe too strong a world, but you’re certainly going to see a lot of stress globally in the coming days,” said Vontobel’s Colin. “It’s going to be repetition of what we saw earlier this year in terms of volatility and stress.”