Hong Kong leads fresh Asian market selloff after Fed chief's testimony, STI down 0.6%

US Federal Reserve chair Janet Yellen at her semi-annual monetary policy report to the House Financial Services Committee.
US Federal Reserve chair Janet Yellen at her semi-annual monetary policy report to the House Financial Services Committee. PHOTO: BLOOMBERG

HONG KONG/SINGAPORE (AFP, BLOOMBERG) - Hong Kong stocks plunged more than four per cent to a more than three-year low on Thursday (Feb 11), leading another sell-off across Asian markets and extending a global rout fanned by worries over the world economy.

Comments from Federal Reserve boss Janet Yellen virtually confirming the US central bank will not lift interest rates next month put further pressure on the beleaguered US dollar, while the ongoing supply glut saw oil prices sink below US$27 a barrel.

Dealers continued their flight to safe investments that has played out across trading floors from Asia to the Americas this week as they fret about a possible global recession.

Hong Kong stocks - closed from Monday to Wednesday for the Chinese New Year break - slumped 4.2 per cent to their lowest level since June 2012 before edging back marginally. It had already lost 12 per cent by the end of trade Friday.

Selling was also stoked by concerns about riots in the city this week that saw police battle street sellers, injuring several people, which analysts said could hit tourism.

"You can't avoid a drop because everywhere has come down so much during this time and the same concerns are still there - oil price, global recession," Steven Leung, an executive director for institutional sales at UOB Kay Hian, told Bloomberg News.

"The image of Hong Kong as a metropolitan city has been hurt quite seriously" by the riots, he said.

There were also sharp losses on most other regional markets, with Seoul 2.4 per cent down, while Wellington, Jakarta and Manila also sank.

Singapore's Straits Times Index pared a 1.3 per cent loss to trade down 0.58 per cent at 2,567.0 as of 11:05 am.

However, Sydney staged a minor rebound on bargain-buying. Tokyo, Shanghai and Taipei were closed for public holidays.

The US dollar sank against the yen to levels not seen since late 2014 after Ms Yellen's testimony to congress.

While she made no explicit comments on the Fed's plans to lift rates - after December's rise - her description of clouds looming over the US economy was taken as a hint there will be no increase in the immediate future.

"Financial conditions in the United States have recently become less supportive of growth, with declines in broad measures of equity prices, higher borrowing rates for riskier borrowers, and a further appreciation of the dollar," she told lawmakers.

Soon after her comments the dollar fell to 113.40 yen from 115.14 yen the day before. And on Thursday it fell further, to 112.58 yen, its weakest rate since November 2014.

The dollar also sank against most emerging market currencies, with the Australian dollar, South Korean won, Indonesian rupiah and Malaysian ringgit all enjoying healthy gains.

"Janet Yellen had a delicate task last night - to sound concerned enough to reassure investors that the Fed was feeling their pain, while still sounding upbeat enough to bolster the notion that this volatility will all blow over," Sharon Zollner, a senior economist in Auckland at ANZ Bank New Zealand Ltd., said in a client note.

"The Fed has no idea how this is going to pan out either, so all Yellen could really do was ensure she wasn't the catalyst for the lurch."

Energy firms again felt the heat as oil prices continued to head south owing to the supply glut, overproduction and the prospect that demand is unlikely to pick up any time soon.

US benchmark West Texas Intermediate was two per cent down, below US$27, while Brent shed 1.1 per cent to below US$31. That came a day after WTI sank 1.8 per cent and Brent lost 1.7 per cent.

E-mini futures on the Standard & Poor's 500 Index fell 0.7 per cent after the underlying US equity benchmark index closed down less than 0.1 per cent on Wednesday, with gains of as much 1.6 per cent evaporating in the final hour of trading.