(Bloomberg) — Several of Asia’s key indexes have hit bleak milestones on growing investor concerns about the economic fallout of the war in Ukraine and sustained regulatory pressure on China’s technology sector.
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The benchmark MSCI Asia Pacific Index tumbled as much as 2.8% on Monday, taking its losses from a record reached in February last year to more than 20% — which puts it on course for a technical bear market. Technology and consumer discretionary sectors were the worst performers.
Monday’s broad rout was sparked by fears of a global inflation shock as oil prices extended their relentless surge on the prospect of a ban on Russian crude supplies. Hong Kong’s Hang Seng Index slid to its lowest level in almost six years, while a gauge of Chinese shares listed in the city sank to its weakest level since March 2009. Japan’s Nikkei 225 lost more than 3% to be among the region’s worst performers.
A surge in oil prices makes some of Asia’s emerging markets such as India, South Korea and Thailand particularly vulnerable given these nations’ dependence on imports to meet their demand. Indian stocks have been among the top losers since Russia invaded Ukraine late last month.
“The Ukraine-Russia conflict will continue to dominate market sentiments and no signs of a resolution thus far may likely put a cap on risk sentiments,” said Jun Rong Yeap, a market strategist at IG Asia Pte. “Elevated oil prices may pose a threat to firms’ margins and consumer spending outlook at a time when the Fed will face greater pressure of having to overcorrect with quicker and larger rate hikes in light of inflationary pressure.”
The Hang Sang Tech Index plunged more than 5% in Hong Kong. Expectations of higher inflation and interest rates mean a bigger discount for the present value of future profits, hurting growth stocks with the highest valuations. Asian equities have struggled as investors also grapple with renewed concerns about China’s crackdown on private enterprise at a time when earnings growth in the region is already lagging…
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