Fear of the unknown sparks sell-off in Asian markets
Profit-takers lock in their gains as they wait to see what will happen in the US and after the leadership change on the mainland
Hong Kong stocks posted their biggest decline in more than three months yesterday, tracking a slump in global markets on concerns over possible political deadlock in Washington and the China leadership change.
The benchmark Hang Seng Index lost 532.94 points, or 2.41per cent, to finish at 21,566.91, below its 20-day moving average. Turnover of HK$72.66 billion was the most since September 14.
"The current unknowns in both the US and China provide a very good excuse for investors to lock in profit," said Castor Pang Wai-sun, head of Core Pacific-Yamaichi.
The Hang Seng has gained as much as 13.4 per cent since September and yesterday's decline mirrored falls across Asia yesterday. Japan's Nikkei lost 135.74 points, or 1.51 per cent, to finish at 8,837.15. The Shanghai Composite Index lost 1.63 per cent to end at 2071.51, after the 18th national congress began in Beijing.
The re-election of Barack Obama as US president on Wednesday may heighten the risk of the US Congress and the White House being unwilling to compromise on expiring tax and spending measures, which could threaten to take the US economy over a "fiscal cliff" and into a slight recession. The pressure has intensified on Congress to end the gridlock and have more certainty on fiscal policy, said Andrew Cole, investment manager for Global Multi Asset Group at Baring Asset Management.
According to estimates by the Congressional Budget Office, the US economy could contract as much as 0.5 per cent next year if there is no fiscal resolution.
"Worryingly, we believe this figure is actually on the conservative side," Cole said.
