Markets Proper Now: Dow down 500 as shares sink steadily

Markets Proper Now: Dow down 500 as shares sink steadily

The Hong Kong stock market on Thursday snapped the five-day losing streak in which it had plummeted more than 2,550 points or 8 percent.

In Frankfurt, growth-sensitive stocks such as Volkswagen or BASF, lost 3.8 per cent and 3.3 per cent respectively.

In the mainland market, the Shanghai Composite - which is subject to limits on the flow of foreign funds - dipped 4.05% to close at 3,129.85.

"The sell-off followed a robust rally in China's stock market earlier this year, which is now unwinding ahead of the Lunar New Year holidays starting next week, as investors lock in profits, said Kevin Leung, global investment strategy director at Haitong worldwide Securities".

Meanwhile, mainland investors from Hong Kong-Shenzhen Stock Connect largely follow the momentum, and they tend to be more speculative. European exchanges also headed south on Thursday.

"We are still in the depth of market volatility as sentiment was hurt by the double whammy of USA market turmoil and deleveraging efforts at home", said Wu Kan, a Shanghai-based fund manager at Shanshan Finance. Only 15 out of the 225 constituent stocks ended in positive territory, including Shiseido, Nikon and Ricoh.

He cited "valuations on China-consumer related industries and execution risks on deleveraging (more specifically financial deleveraging)". The gauge closed at 36.05.

Brokers said investors were reluctant to take on new positions before a long weekend.

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Right now, there are growing worries as to how the Hong Kong market will fare during the upcoming Lunar New Year holiday, when mainlanders will be on extended break, affecting southbound investment flows.

Technology companies, the leading sector over the past year, and banks fell the most. WTI light sweet crude oil was down 64 cents or 1 percent to $61.15/bbl. Topix index fell 1.9%. Southeast Asian benchmark indexes sustained losses, too. Kospi index fell 1.8%.

In London, the FTSE 100 had also experienced a sharp fall on Thursday - dropping by 109 points, or 1.5%, after the Bank of England signalled interest rates were likely to rise earlier and more sharply than previously thought.

The Dow dropped 1,032 points, or 4.1 percent, to 23,860.

Markets followed USA stocks lower after the Dow, coming off a record high, entered a "correction" - that is, a 10 per cent decline from its latest peak - for the first time in two years. The yield on 10-year U.S. Treasuries hit a four-year high on Thursday, suggesting more fears of rising inflation.

A stronger yen reduces the yen-denominated value of overseas income for Japanese corporations and is therefore seen as a negative for stocks, especially those of exporters.

Generally speaking, the southbound flow from the Hong Kong-Shanghai Stock Connect can be viewed as "smart money" and these investors look for long-term gains.

By contrast, investors using Hong Kong-Shenzhen Stock Connect are mostly young and new investors. "The fundamentals of the global economy", he stressed, "aren't bad".

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