Asian markets are careening toward their worst month since the outbreak of the Covid-19 pandemic in early 2020, hit by a mighty US dollar and rising global recession fears.
The MSCI Asia ex-Japan Index, which captures 10 major markets across Asia, excluding Japan, has fallen 12.8 per cent so far this month, on track to post the biggest drop since March 2020, when the pandemic had wreaked havoc on global markets, CNN reported.
The index is also set to end the third quarter down nearly 14 per cent.
Among major stock markets, Hong Kong and South Korea have had the worst month so far, down 14 per cent and 12 per cent, respectively.
For the quarter, the Hang Seng Index has tumbled 21 per cent so far, headed toward its worst quarter in two decades, according to Refinitiv.
Concerns about a global recession and hawkish policies by central banks around the world have weighed on investor sentiment, CNN reported.
The US dollar surged to a fresh two-decade high on Wednesday against a basket of major counterparts, boosted by the Federal Reserve’s policy tightening.
The soaring greenback has sparked further fears of capital outflows from Asia’s emerging markets.
“The US dollar’s one way upward journey continues to drive safe-haven flows and keep concerns on Asian equities elevated,” Manishi Raychaudhuri, head of Asia-Pacific Equity Research at BNP Paribas Securities, said in a research note this week.
“Foreigners continued to sell Asia equities,” said Citi analysts in a separate report on Friday.
They noted that Taiwan, Japan, India, and South Korea have seen nearly $5 billion in total foreign outflows this week, CNN reported.
Nevertheless, Raychaudhuri expects some silver linings for Asia.
“Some tailwind for Asian equities is coming in the form of post Covid reopening — in Hong Kong, Japan, Taiwan and potentially in China,” he said.