HONG KONG (MarketWatch) — Most Asian stocks tumbled Monday, with reports of North Korean leader Kim Jong-il’s death helping to accelerate losses in many markets that were already weighed by concerns about the European debt crisis.
South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.67% finished 3.4% lower at 1,776.93, China’s Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 -2.35% declined 0.3% to 2,218.24 and Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.63% gave up 1.3% to 8,296.12.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.03% fell 1.2% to 18,070.21, Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -1.09% dropped 2.4% to 4,060.40 and Taiwan’s Taiex shed 2.2% to 6,633.33.
Reports citing North Korean state television said midday Monday that the communist nation’s leader Kim Jong-il died on Saturday. See report on Kim Jong-il’s death.
North Korean leader dead
North Korea's reclusive leader Kim Jong-il has died according to North Korean TV reports.
Following the announcement,the South Korean military went on high alert, while Japanese Prime Minister Yoshihiko Noda set up a crisis management team on North Korea to handle the implications, according to reports.
“There is no question that markets will be volatile for a week or two,” Royal Bank of Scotland economist Erik Lueth said in a note to clients following the reports of Kim’s death.
“We believe the chances of a military aggression are limited. ... The Northern regime will be prickly over coming months, and we should look out for signs that it is withdrawing from low-level diplomatic efforts to mend fences,” Lueth said.
The death of the North Korean leader and the consequences for geopolitical stability weakened investor appetite across equity markets, although most stock markets recovered the steep intra-day losses they suffered.
The news also had an impact on currency markets, where the U.S. dollar /zigman2/quotes/210598269/delayed DXY -0.29% appreciated on its safe-haven appeal, while the South Korean won tumbled.
The performance in Asia followed a mixed finish for U.S. stocks on Friday, after ratings agency Moody’s lowered Belgium’s credit rating, and rival Fitch put six euro-zone nations on watch for a possible downgrade. Read more on Friday's U.S. session.
“The Christmas rally that everyone has been looking for has vanished into thin air, thanks to Europe,” said Tom Kaan, director of equity sales at Louis Capital Markets in Hong Kong.
Attention this week will be on a possible credit ratings downgrade of France, he said.
“Liquidity or interest is not there. Once you have people short-selling, as you see in Hong Kong, as well as no real buying interest out there, then you have a very weak market,” he said. “Interest has thinned out tremendously. It’s a year-end market.”
Japanese broker shares were weak, with Nomura Holdings Inc. /zigman2/quotes/206251373/delayed JP:8604 +0.57% /zigman2/quotes/201003564/delayed NRSCF +3.78% /zigman2/quotes/207276383/composite NMR +1.04% dropping 4.3%, and Daiwa Securities Group Inc. /zigman2/quotes/201391978/delayed JP:8601 -2.05% /zigman2/quotes/206649614/delayed DSECF -9.20% off by 3.2%. Shares of HSBC Holdings PLC /zigman2/quotes/202687335/delayed HK:5 -0.30% fell 2% in Hong Kong.
Other companies with global exposure also dropped in Hong Kong, with Li & Fung Ltd. losing 3.1%, while Esprit Holdings Ltd. /zigman2/quotes/205943307/delayed HK:330 +4.44% /zigman2/quotes/206195919/delayed ESPGY -7.55% sank 6.5%.