Asian share markets mirror US decline

HONG KONG: A brutal sell-off in Asian stocks resumed on Thursday after a brief respite as US inflation data rattled Wall Street and raised the spectre of further interest rate hikes by the Federal Reserve.

US consumer prices increased a larger-than-expected 0.6 percent in April, with the key core measure, which excludes volatile food and energy, up 0.3 percent compared with forecasts for 0.2 percent.

The news sparked a sharp 1.88 percent drop on Wall Street, the largest single day fall in three years, in turn sending Tokyo down 1.35 percent and the rest of Asia with it.

"There's no doubt the overnight slump on Wall Street is behind the sharp losses in Japanese equities," said Fumiyuki Nakanishi, chief strategist at SMBC Friend Securities.

"The stronger-than-anticipated US April CPI revived speculation that Fed policymakers will probably again hike interest rates at their next meeting in June in order to keep inflation in check," he said.

US inflation numbers were the latest in a slew of factors stacking up against equities after the region's stocks markets peaked earlier this month at record and multi-year highs.

The sell-off began in earnest on last Friday after US Federal Reserve Chairman Ben Bernanke failed to provide the markets with a clear indication over whether the current rate hike cycle was nearing a much anticipated end. 

Selling accelerated as the US dollar weakened sharply -- making exports from Asia less competitive -- and as commodity prices took a dive off record highs.

Most telling, perhaps in the US inflation data, was that it showed that historically high oil and commodity prices are finally creeping into the cost of living, eroding growth and increasing pressure on central banks to act.

The result on Thursday was billions of dollars were again wiped off the region's bourses, leaving investors to lick their wounds and rethink their portfolios and economic outlook.

"The market is nearly in a panic, with a big blow from Wall Street leaving it almost defenseless," Hanwha Securities analyst Lee Jong-Woo said in Seoul, which fell 2.59 percent.

Lee said the market has been very volatile as foreign investors increased their sell-offs of local shares, triggering fears that a sell Korea mindset has emerged.

"Sentiment is pretty weak but given the magnitude of the recent drops, we may run through the correction sooner than later," he added.

Macquarie Investment Management advisor Joseph Youssef in Sydney, down 1.88 percent, said hedge fund activity in response to falls in New York was a key driver.

"I think you will find that once again the hedge funds are at play and with any hint of nervousness they hammer it -- their mandate is to trade and make quick profits -- they're not overly interested in fundamentals," Youssef said.