By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Asian stocks slumped Wednesday after heightened fears of U.S.-led military intervention in Syria sparked a selloff in global markets, with Philippine shares and the Indian rupee plunging amid worries about emerging markets.
The Philippines’s benchmark PSEi /zigman2/quotes/210597949/delayed PH:PSEI +0.84% lost 3% during the session, on top of a 4% tumble the previous day. In afternoon trade, Thailand’s SET /zigman2/quotes/210598047/delayed TH:SET +2.10% lost 1%, while India’s Sensex /zigman2/quotes/210597966/delayed IN:1 -0.36% dropped 0.5% amid heavy losses for the rupee.
/zigman2/quotes/210597981/delayed JAKIDX 5,535.69, -153.23, -2.69%
/zigman2/quotes/210598065/realtime DJIA 25,766.64, -1,191, -4.42%
“We expect the authorities in India and Indonesia, where current account deficits already exposed currencies to significant depreciation pressure from [the U.S. Federal Reserve’s] taper fears ... to be challenged to keep the pressure from becoming disorderly today,” said Tim Condon, a Singapore-based economist at ING Financial Markets Research.
Indonesia’s JSX Composite /zigman2/quotes/210597981/delayed ID:JAKIDX -2.69% , down more than 3% earlier in the day, recovered sharply to rise 0.7% in choppy afternoon trade.
Dow Jones Newswires cited Indonesia’s finance minister Chatib Basri as saying the country’s economy was estimated to grow 5.9% in 2013, and that the U.S. dollar /zigman2/quotes/210562008/realtime/sampled USDIDR +1.4498% was expected to average about 10,200 Indonesian rupiah this year. On Wednesday, the dollar was fetching about 10,900 rupiah, following a sharp recent weakness.
Among the region’s developed markets, Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -2.13% finished the day 1.5% lower and Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.75% dropped 1.1%, while Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.31% fell 1.6%.
“Weaker equity markets around the world reflect a growing consensus that the West is likely to act in response to Syria’s use of chemical weapons. ... Whether or not Western nations do take military action in coming days, there remains potential for the situation to escalate. Investors are unlikely to wind back risk premium quickly in these circumstances,” said CMC Markets chief market analyst Ric Spooner.
The declines in Asia followed a 170-point, 1.1% drop Tuesday for the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -4.42% , with equities in the Middle East and Europe also slammed on worries over escalation in Syria, after government forces reportedly used chemical weapons against civilians amid the ongoing civil war.
U.S. President Barack Obama is currently consulting with allies and members of the U.S. Congress on the response.
Several analysts said the developments posed a new risk to global markets, but also advised investors against expecting a major impact on the global economy from a possible military confrontation.
“This selloff is a clear knee-jerk reaction by global market participants who are clearly reducing risk over fears the situation in Syria could deteriorate substantially. It’s just a typical case of irrational fear driving investors’ decision making,” said Rivkin Securities analyst Tim Radford.
Global stocks retreat on Syria fears
Global stocks retreated and oil prices surge as investors shifted out of risky assets.
Wells Fargo Advisors chief international strategist Paul Christopher said any potential change in the balance of power in Syria’s civil war poses a new uncertainty for financial and commodity markets, but it doesn’t immediately threaten the global economy. Losses were spread across sectors in multiple markets, with internationally exposed firms in Japan also suffering as the U.S. dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.6647% hovered around ¥97.
Tokyo Steel Manufacturing Co. /zigman2/quotes/209350661/delayed JP:5423 -2.56% sank 8%, Suzuki Motor Corp. /zigman2/quotes/201794956/delayed JP:7269 -2.57% /zigman2/quotes/201304995/delayed SZKMY -3.96% lost 5.4%, and Matsui Securities Co. /zigman2/quotes/209425862/delayed JP:8628 -0.91% /zigman2/quotes/201685257/delayed MAUSY 0.00% fell 3% in Tokyo.