HONG KONG(BLOOMBERG) - Asia's equity traders are once again hitting the sell button with conviction.
The regional equity gauge opened lower after Federal Reserve Chairman Jerome Powell delivered another interest-rate increase and signaled the central bank sees little threat to the economy from the recent market turmoil. Losses only worsened as the Topix index entered a bear market after the Bank of Japan kept policy unchanged.
The MSCI Asia Pacific Index dropped 1.9 per cent as of 2:40pm in Hong Kong, on track for its lowest close since April 2017. The Topix index and Nikkei 225 Stock Average plunged more than 2.5 per cent, while benchmark gauges of Hong Kong and Australia sank more than 1.3 per cent.
Singapore's Straits Times Index was down 0.5 per cent.
S&P 500 Index futures fell as much as 1.1 per cent, erasing earlier gains, after the measure closed at its lowest level since September 2017.
In the end, it all boils down to economic growth concerns, with the Fed lowering its forecast for growth in 2019 to 2.3 per cent from 2.5 per cent in September. Here's what market players are saying:
Lee Kyoung-min, a senior analyst with Daishin Securities Co. in Seoul:
"At the bottom of this is the fact that we are seeing continued chatter about economic fundamentals and growth, which is making market participants very nervous," he said. "A lot of people believed the US will stick with its forecasts for 2019, but the GDP outlook was revised down."
Stephen Innes, head of Asia Pacific trading at Oanda Corp. in Singapore:
"We are wedged between a data-dependent Fed and a very uncertain outlook from the PBOC on the stimulus front as the 90-day trade truce looms ominously in the not-so-distant future. If you wrap this with the global growth slowdown, there is hardly a sliver of optimism for investors to hang their hat on."
Jingyi Pan, a market strategist at IG Asia Pte. in Singapore:
"The less-dovish-than-expected perception towards the Fed had taken a toll on markets, and this sentiment looks to have continued brewing in the Asian session. Not to mention, amongst analysts there is this shift in views today with banks calling for lesser hikes for next year, likely being seen in a negative manner as a lack of confidence in growth.
"While the selloff does look to be overdone currently, the overwhelmingly negative sentiment is intuitively sending investors to the doors ahead of the holidays."
Frank Benzimra, head of Asia equity strategy at Societe Generale SA in Hong Kong:
"You have some concern on global growth. You have this concern at a time when risk premium on equities, especially in the US, is elevated. The Federal Reserve is showing it's not done with increasing interest rates. This is an adjustment on the market from a strongly crowded position, especially on US equities, to a more normal level.
"Actually, this is not something on the US equity market that we find especially surprising. I'm surprised at reaction of Japanese market, which I find a bit excessive."
Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney:
"The market overreacted to the Fed, I think. It is moving in a dovish direction and is on track for a pause in the first half of next year. Markets are being driven by fear rather than fundamentals.
"We have a rule of thumb that says: whatever the market does on the Fed day or the payrolls day, it reverses the next day. But it doesn't always work!"
Kyle Rodda, an analyst at IG Group in Melbourne:
"Markets are looking for an excuse to sell off with what we know now. We're probably entering a stage now where markets have got it in their head that we're preparing for quite a sustained downside going into 2019." Investors might have the herd mentality and sell "just to get out so you don't get caught in the carnage."
And there are more central-bank decisions coming: Indonesia, Taiwan and, in Europe, the Bank of England, are all scheduled to announce interest-rate decisions on Thursday. Economists forecast no policy changes, but traders are paying attention.
With central-bank overhangs ahead of the holidays, Asian traders have been particularly hesitant to position themselves. The MSCI Asia Pacific Index has alternated between gains and losses for six straight days, the longest streak in two months.
In contrast to the Fed's continued tightening path, the People's Bank of China said it would supply lower-cost liquidity to banks willing to lend more to smaller companies to combat a slowdown in the economy. That didn't help the stock market, though, with the Shanghai Composite Index falling for a third day and heading to a two-month low.