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Asian stocks dumped as global market sell-off deepens

Japan's Nikkei off 10% at one point as coronavirus continues to fuel regional fears

The Tokyo Stock Exchange continued its descent on Friday morning, dropping to its lowest in intraday trading since November 2016. (Photo by Kento Awashima) 

TOKYO/HONG KONG -- Asian markets slipped further on Friday, bringing more losses for investors across most of the region as governments and central banks scrambled to respond in the wake of Wall Street's biggest plunge in more than 30 years.

Japan's benchmark Nikkei Stock Average plummeted 10% at one point, recording the biggest single-day drop since April 1990, before the collapse of the country's economic bubble. Markets in Hong Kong, China and South Korea also fell sharply, while money also flooded out of smaller Asian emerging markets. The scale of losses caused automatic "circuit breakers" to halt trading in Thailand, Indonesia and the Philippines.

However the rout in Asia eased in later trading on Friday and some markets staged gains. The gyrations came after a historic fall on U.S. markets on Thursday when the Dow Jones Industrial Average fell almost 10%, its biggest daily loss since 1987.

Japan's government held an emergency meeting on Friday with the Financial Services Agency and the Bank of Japan to discuss a response to the equity market crash. After the three-way meeting Yoshiki Takeuchi, vice-finance minister for international affairs, told reporters: "The government and the BOJ will pay close attention to market and economic trends. If necessary, we will take measures collectively."

The BOJ said early on Friday that it would buy government bonds worth 500 billion yen ($4.7 billion) to inject money into the markets. Later the central bank weighed into markets again, saying it would purchase an additional 200 billion yen of Japanese government bonds, with five to 10 years to maturity, in an unscheduled operation on Friday afternoon.

Before the close the Nikkei index reversed some of its losses, ending the day down 6%, at 17,431. At one stage the index dropped more than 1,800 points to 16,690, its lowest in intraday trading since November 2016. The index ended further into bear market territory, with the decline from its recent high in January exceeding 27%.

In South Korea, the Financial Services Commission imposed a ban on all short-selling in the stock market for six months from Monday. It is the first time the regulator has prohibited short-selling since August 2011. The move was announced after the Kospi stock index dropped more than 8% early on Friday, triggering a temporary halt to trading. The Kospi closed down 3.47% to 1,770.74, after pension funds boosted the index by buying stocks.

President Moon Jae-in asked the government to bring forward "unprecedented solutions", saying the crisis sparked by the coronavirus outbreak could not be compared with previous health alerts such as SARS. "We should think of people's difficulties and show our will to resolve this in the side of people," Moon said in an emergency meeting with ministers and financial officials.

Indonesia also announced a second stimulus package worth Rp 125 trillion ($8.36 billion) to cushion the impact from the coronavirus.

In Hong Kong the Hang Seng fell 5.7% on opening and in the afternoon remained 2.3% lower.

However Australia's benchmark ASX 200 index, which declined 7.3%, staged a strong late recovery and ended 4.4% higher on the day after the central bank intervened in money markets with A$8.8bn of liquidity.

The MSCI All-Country World Index has fallen more than 20% this year and is on course for the worst week since 2008.

"With so much pessimism in the market right now, even large-scale measures by central banks or governments will be like pouring water on a hot stone," said Keita Kubota, head of Japanese equities at Neuberger Berman in Tokyo.

Rodrigo Catril, a currency strategist at National Australia Bank in Sydney, said: "We are certainly in the midst of a severe global downturn and more drastic policy action from both central banks and governments should be expected. These volatile times are not likely to go away in a hurry."

Friday's market gyrations came at the end of a highly volatile week when global financial markets suffered huge losses amid rising concerns over the new coronavirus and its impact on the global economy.

U.S. President Donald Trump's decision to ban travel from most of Europe for a month added fuel to the fire, clouding investor sentiment.

On Thursday the Dow suffered its worst loss since the 22.6% recorded on Black Monday in 1987, exceeding the 7.9% dive on Oct. 15, 2008 during the financial crisis. The benchmark has now fallen more than 8,300 points -- over 28% -- from its all-time high on Feb. 12. The broader S&P 500 index in the U.S. closed down 9.5%.

But investors were also focused on events in Europe, where Italy has been one of the countries worst affected by the coronavirus and where the European Central Bank disappointed markets on Thursday when it decided not to cut interest rates.

Shoji Hirakawa, chief global strategist at Tokai Tokyo Research, said: "The European Central Bank lacked a sense of crisis which caused the indexes to plunge." France and other E.U. nations have followed Italy by introducing school shutdowns and other restrictions to try to curb the spread of the virus.

Falling oil prices have also weakened investor sentiment. The U.S. benchmark West Texas Intermediate (WTI) crude price has plunged 40% over the last month.

Tai Hui, chief Asia market strategist at J.P. Morgan Asset Management, said: "While investors are looking for immediate remedies from governments and central banks, the virus spread has far outpaced the typical reaction time by governments in devising new policies to deal with a largely unprecedented economic and social event.

"Government bureaucracy simply has not kept pace with the nature of the outbreak and market expectations.For markets to be less anxious, we need to see the number of new infections stabilize [and] fiscal and monetary policy support implementation."

Additional reporting by Kim Jaewon in Seoul

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