May 31, 2013

    Asian stocks fall on fears of QE tapering off

    JAPAN'S Nikkei share average dived 5.2 per cent yesterday, leading a tumble in Asian stocks as concern over the US Federal Reserve scaling back its huge stimulus programme in the next few months rattled investors.

    The plunge in the Nikkei accelerated in the afternoon, extending the benchmark's losses to nearly 15 per cent since it hit a 51/2-year high on May 23, putting it well into "overbought" territory and leaving it ripe for profit-taking. It ended 7.3 per cent lower the same day.

    Fed chairman Ben Bernanke said last week that the US central bank could decide whether to reduce its US$85 billion (S$108 billion) in asset purchases every month at one of its "next few meetings", depending on economic data.

    His comments pushed up Treasury yields to 13-month highs on Wednesday, prompting investors to cut back on high-dividend-paying stocks in the United States and Asia.

    Singapore's real-estate investment trust index sagged a further 2.8 per cent yesterday, after shedding 2.8 per cent in the previous session.

    "People are worried that a winding down of quantitative easing could end the generous supply of money, leading to a surge in interest rates and a downturn in stock prices and economies," Mr Ryoji Musha, president of Musha Research in Japan, wrote in a report.

    Sentiment was also downbeat on Wednesday after the Organisation for Economic Cooperation and Development trimmed its world-economic-growth forecast for this year to 3.1 per cent from 3.4 per cent.

    Despite the recent sell-off, the Nikkei is still up 10 per cent since April 4 - when the Bank of Japan announced a sweeping monetary-expansion campaign to eliminate years of deflation and revive growth - and has risen 31 per cent this year.