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Asian shares tumble as emerging market fears return

Asian markets sank on Monday following the worst losses on Wall Street in seven months, with investors gripped by renewed fears over emerging economies days ahead of a crucial Federal Reserve policy meeting.

HONG KONG: Asian markets sank on Monday following the worst losses on Wall Street in seven months, with investors gripped by renewed fears over emerging economies days ahead of a crucial Federal Reserve policy meeting.

Japan's Nikkei, which was the best performer last year, continued its 2014 downtrend as the yen surged against the dollar, while shares in developing countries also suffered selling pressure.

Tokyo tumbled 2.49 per cent by the break, Hong Kong shed 2.37 per cent, Shanghai lost 0.56 per cent and Seoul was 1.70 per cent off.

Taipei dipped 1.59 per cent, Singapore fell 1.48 per cent, Kuala Lumpur was 1.11 per cent lower and Manila lost 1.50 per cent. Sydney was closed for a public holiday.

"Capital is fleeing equities generally," said Hiroichi Nishi, SMBC Nikko Securities general manager of equities.

"For Japan, the combination of weaker US stocks, a weaker dollar, and heightened fears over a slowing of global economic growth will be enough to send stocks down," he said.

In New York on Friday, the Dow sank 1.96 per cent, the biggest percentage point fall since June last year, while the S&P 500 plummeted 2.09 per cent and the Nasdaq lost 2.15 per cent.

US investors ran for cover on Friday as an 11 per cent slump in the Argentine peso against the dollar refuelled concerns about emerging market currencies.

Those fears were exacerbated by data last week indicating manufacturing activity in China -- a key driver of global growth -- had contracted in January.

"There is a fear that there is going to be a contagion in emerging-market currencies," Maybank Kim Eng head of sales trading Kevin Foy said.

The growing pessimism sent investors to seek out safer, lower-return assets, particularly the Japanese yen, which is considered a safe haven in times of economic uncertainty.

In New York the dollar sank to 102.30 yen Friday from 103.24 Thursday, while the euro fell to 139.92 yen from 141.39 yen.

In early Asian trade on Monday the dollar was at 102.20 yen and the single currency fetched 139.85 yen. The euro bought $1.3666 compared with $1.3678 Friday in New York.

Traders will now be looking to this week's Fed meeting to see if it announces any further cuts to its stimulus programme.

The central bank last month said it would reduce its bond-buying by $10 billion a month from January to $75 billion, citing a pick-up in the economy.

However, the move has raised fears of a capital flow from developing countries as investors repatriate their cash to the West.

In oil trade, New York's main contract, West Texas Intermediate for March delivery, was up 27 cents at $96.91 in early Asian trading while Brent North Sea crude for March eased 12 cents to $107.76.

Gold fetched $1,269.70 at 0200 GMT, compared with $1,259.60 late Friday.

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