China, Taiwan row unnerves Asian markets

Singapore, July 16: Rising tensions between China and Taiwan hit most north-east Asian stock markets on Friday, with Taipei's main index ...

Singapore, July 16: Rising tensions between China and Taiwan hit most north-east Asian stock markets on Friday, with Taipei’s main index suffering its worst single-day fall in nine years and Hong Kong slumping nearly two per cent. Fears that China’s row with Taiwan could escalate also fuelled bearishness in Japan, where the benchmark Nikkei 225 average ended down one per cent at 18,248.30, led by a slide in high-tech stocks.

The dollar was supported at around 121 yen at 0920 GMT on safe-haven buying spurred by the China tensions, compared with 120.97/07 yen in late New York trade on Thursday. But oblivious Korean stocks surged four per cent, riding a massive inflow of funds.

Australian shares ended 0.4 per cent down. In Tokyo, the Nikkei faltered after Warburg Dillon Read changed its recommendation on internet investment firm Softbank from a "hold" to a "sell" and set its target price for the stock at 20,000 yen. Softbank shares shed 7.2 per cent, ending at 32,300 yen.

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Taiwan’s battered Taiex fell 6.4per cent to 7,411.6 as panic-stricken investors dumped shares. The independent Hong Kong Economic Times newspaper said on Friday China might occupy one or two of Taiwan’s outer islands if Taipei showed signs of pursuing independence.

China, however, let a glimmer of flexibility shine through its mounting threats to Taiwan, with a Beijing official calling on Taipei to clarify recent statements renouncing a long-standing commitment that it and China are part of the same country.

Taiwan’s abandonment of the "one China" policy alarmed Hong Kong investors already worried by China’s slowing economic growth, sending the Hang Seng down 1.6 per cent to 13,545. The Taiwan stock slump "triggered futures-related selling and pushed the market lower," said Steve Lo, dealing director at OSK Asia Securities.

The Korea Composite Stock Price index shot up four per cent to 1,020.8. A slew of data showing sharp rises in market liquidity, including record high customer deposits at brokerage houses, helped investorsturn a blind eye to a rise in interest rates.

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"The money is flowing into the stock market as many retail investors see this level as a good opportunity to buy after a sharp fall early in the week," said Lee Young-hwan, an analyst at Daewoo Securities. Australia’s All Ordinaries index closed down 0.4 per cent at 3,054.4, as stocks like News Corp were sold.

Singapore’s Straits Times index finished one per cent lower at 2,134.2 as margin calls weighed on the market. Philippine shares closed up 0.3 per cent at 2,585.7, while New Zealand shares ended down 0.1 per cent at 2,182.2. Malaysian stocks were down 0.2 per cent at 843.12 and Indonesian stocks were down 0.3 per cent at 662.37.