STOCK markets in Asia continued to sober up yesterday to the growing possibility that the war in Iraq would be more drawn out than initially anticipated.
Fragile investor sentiment was shaken by Monday's huge losses on Wall Street, as reports streamed in of fierce battles being waged on numerous fronts in Iraq.
The Tokyo and Seoul bourses, in particular, reacted sharply to the massive 307-point, or 3.6%, fall in the Dow Jones Industrial Average, the 3.66%, or 52-point, decline in the tech-laden Nasdaq, and the 3.5% drop in the broader S&P 500 index.Tokyo's Nikkei 225 fell 2.3% to 8,238 points and Seoul's Kospi lost 2.6% to about 555 points. Taiwan's Weighted Index fell 1.6% to 4,498.
Analysts noted that investors were now trading on news breaks, and said volatility in the markets could be expected until a clearer picture of the Iraq situation emerged. Such volatility was evident in European trade.
European markets generally slipped by more than 1% in the first few hours of trading yesterday in response to Wall Street's lower close on Monday, reports of bad weather holding back US/British troops and Iraqi President Saddam Hussein authorising his troops to use weapons of mass destruction should the coalition forces break through a certain radius from Baghdad.
But the markets started paring losses when reports flashed that the Iraqi port of Umm Qasr was safe and coalition troops were racing towards Baghdad.
The volatility seen in equities over the past few days also extended to the oil, gold, currency and bond markets, which had rebounded as shares slumped on Monday. At press time, the euro, oil and gold were trading higher, even though stock markets in Europe were flip-flopping in either direction.
“There is a lot of pent-up demand and people want to get on with business,'' said Mayban Securites head of research Zulkifli Hamzah. “Appetite for risk has long been depressed and a reversal could be forthcoming.''
Valuation of stocks on the KLSE, analysts said, was attractive but investors seemed hesitant to commit themselves with the war clouding their investment decisions.
Analysts generally agree that the conclusion of the war should usher in better sentiment and ultimately better economic performance, but some are not so sure. In New York, the Dow Jones was up about 10 points in the first 10 minutes of trading yesterday.
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