EBC Markets Briefing | Japanese stocks suffer worst day since 1987

Asian stocks collapsed on Monday after Wall Street bloodshed. The Nikkei 225 plunged 12.4%, the biggest daily loss since 1987, entering a bear market with the decline from the yearly peak in excess of 20%.

The sharp appreciation of the yen, which has gathered pace since the BOJ increased interest rates on July 31, is also rumbling through the market as exporters may have not braced for the turn.

Concern is growing that the Fed is behind the curve with policy support and global investors rushing into safe havens to spur a bond rally The 10-year Treasury yield has dived to the lowest since last July.

The tech-heavy indexes were among the worst performers with the KOSPI falling 8.8%. The ASX 200 index closed 3.7% lower, driven by weaker commodity prices, and the Nifty 50 was down around 2.6% as of now.

The crash is reminiscent of what happened right after the outbreak of Covid-19. Recession fears dealt a heavy blow to global equities and the steep sell-off last for months.

Going into the Japanese market at this moment is akin to catching “a falling knife” as the only reason why it was strong in the last two years is because of the yen weaknesses, said UBS Global Wealth Management.

The bank expects the yen to reach about 143 per dollar and even 135 if Japanese life insurance companies and pension funds start repatriating more yen back to Japan.

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