Asian Markets Follow Wall Street’s Lead in a Broad Sell-Off

HONG KONG — Investors across Asia — from Hong Kong to Seoul, Tokyo to Shanghai — appeared to get the same memo on Friday morning: Sell.

Following drastic losses in the United States on Thursday, stock markets across the region fell deep into the red in morning trading. The sell-off was particularly strong for shares of companies based in mainland China, which have been among the world’s best performers. Markets in Southeast Asia were down as well.

Futures contracts that track stocks in the United States were up and down during the Asian trading day, offering conflicting signals about what Friday’s markets would do.

The sell-off, which started earlier this week, was prompted by fears of rising inflation in the United States as strong data, including low unemployment and high corporate profits, suggested the economy’s resilience.

Rising inflation could lead the Federal Reserve to raise its interest rates sooner than expected, setting off a series of reactions around the globe as the cost of borrowing in American dollars would begin to rise.

But the sell-off Friday morning also served as a reminder that major markets in Asia had risen greatly, and in the minds of many analysts were ready to come down.

For example, last year was stellar for shares of Chinese companies that trade around the world. The MSCI China stock index, which tracks shares of some of China’s biggest companies, is still up nearly 50 percent since the beginning of last year even after the recent stock slump.

“We are witnessing the longest rally in the history of Chinese stocks,” analysts at Goldman Sachs wrote to clients early this week, adding, “A tactical correction appears overdue and markets could fall further.”

Shares in Shanghai were down more than 4 percent midday Friday, while Hong Kong shares were down more than 3 percent. Shares in Tokyo were down 2.7 percent.

Investors were also keeping a careful eye on China’s currency, the renminbi. The currency, which is carefully managed by the Chinese government, took a hit on Thursday and fell by as much as 1.2 percent.

Before that, the currency had been rising steadily against the American dollar, leading to worries that Beijing could step in further to contain it. World markets can be sensitive to sharp swings in the renminbi. In 2015, the Chinese government devalued the currency, sending global markets into turmoil.

“You can twist yourself into knots trying to figure out what happens day to day,” said Andy Rothman, investment strategist at Matthews Asia.

“But the Chinese government has a lot of control on the currency,” he added. “They can’t control the direction but they can control how much it moves in that direction.”

Content originally published on https://www.nytimes.com/2018/02/08/business/dealbook/stock-markets.html by ALEXANDRA STEVENSON