Asia stocks snap back into the red on lingering North Korea tensions, STI bucks trend

A man looks at a stock prices board showing the numbers on the Nikkei 225 at the Tokyo Stock Exchange.
A man looks at a stock prices board showing the numbers on the Nikkei 225 at the Tokyo Stock Exchange. PHOTO: AFP

TOKYO (REUTERS) - Asian stocks turned lower on Thursday (Aug 10) as investors fretted about the latest flare-up of tensions between the United States and North Korea, sending Seoul shares skidding to two-month lows even as the previous day's rush into safe-haven assets appeared to slow.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.68 per cent, snapping a brief foray into positive territory early in the day and extended losses from Wednesday. Japan's Nikkei also handed back earlier gains and was a shade lower.

Shanghai dipped 0.3 per cent and Hong Kong's Hang Seng lost 1.3 per cent. South Korea's KOSPI dropped 1 per cent, hitting a two-month low to move further away from record highs set at the end of July.

Singapore's Straits Times Index (STI) bucked the trend, opening 0.61 per cent higher at 9:00 a.m. local time, and by noon it continued to be in positive territory at 3,323.36 points.

"Some investors had wanted reasons to unwind their long positions built up in emerging market equities, and they found an opportunity in the latest bout of Korean tensions," said Kota Hirayama, senior emerging markets economist at SMBC Nikko Securities in Tokyo.

"At the moment, it is unclear how the Korean situation will play out and that is hampering the markets. But as past incidents involving the Korean Peninsula have shown, the impact on financial markets tends to fade away over a span of few days."

The declines in some Asian bourses, like Japan's Nikkei, was limited after Wall Street shares closed barely lower overnight, trimming losses, as investors appeared to brush off geopolitical concerns.

The flight-to-safety into US Treasuries also abated overnight. The 10-year Treasury note yield initially fell to a six-week low of 2.212 per cent as bond prices rose, but climbed back to 2.250 per cent. "US equities managed to cut its losses towards yesterday's close and while the VIX (volatility index) did pop higher, it still remains at an overall low level. Furthermore, the benchmark Treasury yield also climbed away from lows," said Junichi Ishikawa, senior forex strategist at IG Securities in Tokyo. "These developments suggest that risk aversion caused by geopolitical tensions in North Asia are temporary in nature, as long as it does not involve military conflict."

Bids into the Japanese yen and Swiss franc, currencies that find demand in times of geopolitical anxiety, also tapered.

The US dollar was steady at 110.005 yen after going as low as 109.560 overnight, its weakest in eight weeks.

The Swiss currency slipped 0.2 per cent against the dollar to 0.9655 franc after surging more than 1 percent the previous day.

The euro inched down 0.1 per cent to $1.1744 while the dollar index against a basket of major currencies added 0.1 per cent to 93.620.

Currency markets focused on the US producer price index data due later in the session.