Tokyo stocks surged over 10 per cent on Tuesday, rebounding from a record selloff driven by concerns about the US economy and a stronger yen. The Nikkei 225 index soared 10.33 per cent, gaining 3,249.36 points to reach 34,707.78, while the Topix index rose 10.26 per cent, adding 228.49 points to close at 2,455.64.
In South Korea, the Kospi opened sharply higher, gaining 4.35 per cent to reach 2,547.66 within the first 15 minutes of trading. This recovery followed its largest daily loss of nearly 9 per cent on Monday, prompted by US recession fears and weak performance in the big tech sector. A sidecar order was issued to halt programme purchasing after the Kospi 200 index rose over 5 per cent for more than a minute. Major stocks in Seoul, including Samsung Electronics, SK hynix, and Hyundai Motor, posted significant gains, and the local currency strengthened slightly against the dollar.
This recovery potentially marks a turnaround for Asian markets, which had been battered a day earlier when the Nikkei closed at 31,458.42, dropping 4,451.28 points. On Tuesday, the Nikkei index rebounded sharply, surpassing 34,000 in early trading, following its previous close of 31,458. This was a stark contrast to Monday’s 12 per cent loss, the largest one-day drop since October 1987’s “Black Monday.”
The rally was supported by reassuring statements from central bank officials, which helped ease investor concerns. Wall Street futures also indicated stabilisation, with S&P 500 futures up 0.9 per cent and Nasdaq futures rising 1.2 per cent. The dollar edged up to 145.64 yen after a sharp drop on Monday, and regained ground against the Swiss franc.
Chris Weston from broker Pepperstone noted the potential for a strong counter rally after the significant margin position liquidation in Asian markets. However, he cautioned that it would require brave investors to buy with conviction following such a shakeout.
The Bank of Japan’s recent interest rate hikes, the first in 17 years, have added to market volatility, while the US Federal Reserve hinted at a potential rate cut by September. This has made it challenging to gauge the bottom of these historic selloffs, and investors are likely to remain cautious before reinvesting heavily in equity markets. The dollar-yen pair, having fallen 12 per cent in five weeks, is in oversold territory and could stabilise Japanese equities if US macro data surprises on the upside.
In India, stock benchmarks Sensex and Nifty 50 rebounded sharply on Tuesday, each rising over 1 per cent in early trading. Mid and small-cap segments saw even stronger gains, with indices jumping 2 per cent each. This followed a 3 per cent loss on Monday.
Taiwan’s stock exchange held an urgent press conference to calm investor fears after major Asian markets, including Taiwan’s, experienced significant declines. Taiwan’s stocks fell over 7 per cent in morning trade, with tech shares like TSMC hit hard. South Korea’s Kospi fell over 7 per cent, and Singapore’s Straits Times Index and Australia’s All Ordinaries declined by more than 3 per cent on Monday.
The sharp recovery in Tokyo and other Asian markets signals a potential stabilisation following significant selloffs. While central bank reassurances and improved futures markets have calmed investor fears, the path to sustained recovery remains uncertain amid ongoing economic volatility and geopolitical concerns. Investors are likely to remain cautious, awaiting further economic data and policy developments.
Fidelity Asian Values Plc (LON:FAS) provides shareholders with a differentiated equity exposure to Asian Markets. Asia is the world’s fastest-growing economic region and the trust looks to capitalise on this by finding good businesses, run by good people and buying them at a good price.
