Markets in Asia hit hard

A quotation board flashes the foreign exchange rate at a foreign exchange brokerage in Tokyo, on Aug 29, 2017.
A quotation board flashes the foreign exchange rate at a foreign exchange brokerage in Tokyo, on Aug 29, 2017. PHOTO: AFP

Singapore and other Asian bourses were awash in red ink yesterday as traders took fright at the powerful nuclear test by North Korea on Sunday.

The Straits Times Index fell 1.41 per cent to take the biggest hit in the region, while Seoul shares sank 1.19 per cent, Tokyo lost 0.93 per cent and Hong Kong dropped 0.76 per cent.

Shanghai, however, was an outlier, climbing 0.37 per cent, as was Manila, which advanced 0.96 per cent.

Nervy investors are also flocking to safe-haven assets such as gold, which surged to around US$1,335 yesterday, its highest level in about a year. The Japanese yen strengthened about 0.6 per cent against the greenback.

The renewed sense of anxiety follows a few weeks of relative calm after US President Donald Trump vowed early last month to return North Korea's nuclear threats with "fire and fury".

North Korea has conducted several missile tests in recent months, including one launched over Japan into the Pacific Ocean. It has also threatened to fire missiles towards the US Pacific territory of Guam.

It looked like a rerun on Sunday when North Korea said it had successfully tested a hydrogen bomb with "unprecedentedly big power", triggering a magnitude-6.3 tremor.

The US warned that there will be a "massive military response" if it or its allies are targeted.

The aggression is giving investors the jitters, but experts said the mood should pass.

"Expect some short-term risk-aversion trades," said Citigroup economists in a note. "But such market moves tend to be short-lived, as typically tensions defuse quickly. So unless the global response to this test raises the probability of a military strike or North Korean regime collapse (both unlikely), this time it may play out similarly."

SEE BUSINESS: Nuke test sends jitters through local bourse

A version of this article appeared in the print edition of The Straits Times on September 05, 2017, with the headline 'Markets in Asia hit hard'. Print Edition | Subscribe