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Equities

Asian equity bull run halts, spooked by Wall Street

India's Sensex and Shanghai Composite hit hardest, both down 2.7% on week

TOKYO -- The bull run of Asian stocks has come to a halt. Major benchmark indexes in the region, apart from Malaysia, are now off their highs as investors grow wary of Wall Street stocks' performance.

The Nikkei Asia 300 Index of more than 300 regional companies excluding Japan fell 2.4% this week. Stocks in China, India and the Philippines performed especially poorly. The Chinese benchmark Shanghai Composite Index and India's Sensex have both fallen 2.7% since Jan. 26. The Philippine's PSEi also fell more than 2%.

The price correction by Asian stocks mirrors a stumble on Wall Street. By Thursday, the U.S. benchmark Dow Jones Industrial Average and the S&P 500 had fallen 1.6% and 1.7%, respectively, on the week. The downtrend continued Friday, with the Dow falling more than 500 points at one point. 

Movements in the U.S. bond market are believed to be behind the correction. The U.S. reported better-than-expected job growth for January Friday, pushing the 10-year Treasury yield above 2.8% from 2.672% a week ago. Growing inflation expectations and concerns over larger deficits pushed the yield higher.

The market saw better opportunities in bonds with higher yields than stocks with already elevated prices.

In addition, the dollar performed poorly against Asian currencies over the same period. This also hurt regional market sentiment, as a weaker dollar weighs on the competitiveness of exporters.

The Japanese benchmark Nikkei 225 Index closed 1.5% down on the week on Friday, while South Korea's KOSPI fell nearly 2%. In Hong Kong, the Hang Seng Index dropped by 1.3%, ending a seven-week winning streak.  

Among the constituents of the Nikkei 225 and Nikkei Asia 300, China's Leshi Internet Information & Technology performed by far the worst. The stock fell just over 40% during the week, as it flagged its first annual net loss, of 11.6 billion yuan ($1.8 billion), for 2017. The stock was on a nine-month trading suspension until Jan. 23.

Indian pharmaceutical companies were also losers over the week. Dr. Reddy's Laboratories was down 15% because of weak quarterly results. Other pharma stocks, such as Cipla and Lupin, also took a dive this week.

In contrast, Japanese drugmaker Daiichi Sankyo rose 12%. The High Court of Delhi ordered the owners of the former Ranbaxy Laboratories to pay the company about 35 billion rupees ($550 million), upholding the verdict of an international arbitration tribunal.

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