Mizore

It was a fateful Tuesday that the region’s bourses fell drastically. Not since May last year did overeager journalists began to use provocative terms like ‘crash’, ‘meltdown’, ‘overheated’ to describe the present stock market situation in their articles in newspapers everywhere.

The Shanghai stock exchange was largely blamed, having been the first to fall, hitting the daily limit of -10% to close Tuesday at -9%. See chart above.

Its cousin, Hong Kong’s stock market also took a severe beating. The Hang Seng Index followed suit in a wave of selling. See chart above.

Across the Indian Ocean, the Bombay stock market was not spared. See chart above.

Needless to say, the Singapore stock market also went the same way – south. The Chinese companies listed on the SGX were the ones that were hit the most. See chart above.

Certainly this was a correction that will be much welcomed. By having it to drain the excess liquidity that’s been flowing in, would lower the risks of having it later, postponing the start of a cyclical bear market.

Largely this present situation had arisen due to the partial unwinding of the Yen carry trades. Due to the appreciation of the Yen against high yielding currencies, it has caused huge positions in financial assets globally, especially Chinese assets to be realised.

For causing the current state of the Japanese economy and its currency today, we have the Americans in the 80s to thank for that.