Asia report: Selloff continues amid Brexit jitters

Markets in Asia were mostly lower on Tuesday, as Brexit fears continued to plague global equities.

In Japan, the Nikkei 225 lost 1% to close at 15,859.00, adding to Monday’s losses despite the yen holding relatively steady for much of the session.

Monday saw the benchmark post its largest drop in six weeks to hit a two-month low as the yen moved higher, pushed up by investors clambering for the safe-haven investment.

The yen was last 0.51% stronger after Japanese markets closed, nudging 0.51% on the greenback at JPY 105.72 per USD.

Banking shares in the country were hurt as interest rates continued their downward trajectory - Mitsubishi UFJ Financial Group lost 2.18% and Sumitomo Mitsui Financial Group was off 2.03%.

In China, the Shanghai Composite Index added 0.32% during the session, as stocks on the mainland rose after selling off 3.2% on Monday.

Investors were eagerly awaiting a decision from MSCI over whether to include Chinese stocks in its Emerging Markets Index.

The index provider is due to reveal its decision on Tuesday evening in New York.

“Widespread suspension has been a key hurdle for MSCI A-share inclusion, per MSCI,” noted Citi chief China strategist Jason Sun.

“We now view this issue as 100% resolved, reinforcing our 51% probability — i.e. yes, but with high uncertainty — for MSCI to approve the inclusion.”

In Korea, the Kospi was down 0.36%, while Hong Kong’s Hang Seng Index lost 0.61% by closing time.

The mood in Asia was less drastic during the session than on Monday, as investors continued to wait for the results of the US Federal Reserve, Bank of Japan and Bank of England meetings this week.

“It’s the calm before the storm,” said CMC Markets senior sales trader Alex Wijaya.

The risks of Brexit were still weighing on sentiment, however, with investors shedding riskier assets and buying into yen as well as precious metals.

Gold was up overnight and recently hit $1,284 per troy ounce.

Crude prices, meanwhile, continued to retreat, with Brent crude dropping 1.29% at $49.71 per barrel and West Texas Intermediate down 1.5% at $48.17.

Down under, fears around Australia’s former colonial rulers leaving the European Union wiped AUD 30bn off the Australian Securities Exchange, with the benchmark S&P/ASX 200 losing 2.1% to a seven-week low of 5,203.3.

Aurora Funds Management senior portfolio manager Hugh Dive said it was all about Brexit.

“The companies with British pounds exposure, like Henderson Group, are not doing well.

“However, there could be a bounce in these stocks and a buying opportunity if you believe the British bookmakers, who seem to be calling a stay vote,” Dive added.

Energy stocks did not fare well, with Woodside Petroleum dropping 2.9%, while the big miners also lost out with BHP Billiton losing 3.2% and Rio Tinto shedding 1.4%.

The broad selloff also affected markets across the Tasman Sea, with New Zealand’s benchmark S&P/NZX 50 losing 1.3% to 6,834.95.

“There’s a flight to safety - gold is up as well,” said Fat Prophets head of research Greg Smith.

“We might be in for a choppy next few weeks.”

The down under dollars retreated, with the Kiwi last 0.79% weaker at NZD 1.4275 and the Aussie off 0.75% at AUD 1.3639.