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Nikkei Hits Its Lowest Levels In 20 Months

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Business Stock Exchange

January seems a little agitated already… After the U.S dollar dropped dramatically on Christmas Eve, making the yen a strong currency to invest on, Japan’s Nikkei has shown its lowest levels in 20 months. 

Nikkei published on December 31st its annual report, unveiling its first decline in seven years.  South Asian markets responded with a dramatic drop across countries, from South Korea to Hong Kong.

playbook 2019

Despite western analysts predicting that Asia is the go-to market, local experts confirm that the outstanding U.S.-China trade war and the instability in Europe has a repercussion, even so in the far East Asia. 

Is caution the only safe action?

The end of the year was not only hard for European and American markets; it also hit Asia. On Christmas Eve, “the Nikkei fell by an unusually wide margin of 5.1 percent to 19,147.45 points”, headlined the Associated Press.

While some westerners experts encourage their clients to invest in Japan, Japanese analysts have shared to the press much more tempered enthusiasm. “It will be difficult to shift investment positions and portfolios with confidence,” shared Kyoya Okazawa, from BNP Paribas Hong Kong to the local media Asia Review.

Some companies have already lost a lot of their superb for the past weeks, including such as the a very influential car manufacturers Hyundai Motor, Kia Motors but also the electric cable maker Fujikura, whose stock prices have dropped more than a half in 2018.

Across Japanese finance media, journalists warn about “the rising tensions between Washington and Beijing” that “have dampened the outlook for the global economy, most notably China’s slowdown”. 

Is globalization reaching a new point?

To some experts, the global financial situation is only another example of how a new globalized world can be easily influenced when it comes to political decisions and financial repercussions.

“This could show the impact of the trade war filtering through the broader economy”, wrote Robert Carnell, chief economist at ING Asia Pacific in a year-end report.

As a result, neighbor countries also showed signs of weakness, such as Hong Kong’s stocks. For example, the listed Galaxy Entertainment Group fell by 4.9%. In China, Construction Bank fell by 2.9%, AIA Group slumped 3.2%.

While investors bet on Macau, the city’s revenue jumped 16.6% only for last month compared to December 2018. It is mainly caused by a surging revenue in casinos, and partially due to a dynamic financial activity.

Nikkei to reopen on Friday

While analysts remain very hopeful for the year to come, Nikkei will have a chance to show its strength during the market reopening this Friday. Not only Japanese investors will monitor closely the activity, but so will all the Asian markets,  in a very particular context.

Today, during a public announcement, Chinese President Xi Jinping mentioned a possible “peaceful reunification with Taiwan”.

However, he added that Beijing “reserves the right to use force to bring the territory under its control”, blurring the line and definition of this so-called reunification.

With another possible feud ready to spark between Taipei and Beijing, it seems that the political situation in Asia might not be as still as the Western countries would like the continent to be.

playbook 2019
Note: The opinions expressed in this article are the author's own and do not necessarily reflect the view of Alvexo on the matter.