Asian stock exchange experiences significant collapse amid uncertain global factors
In recent weeks, the Asian stock exchange experienced a sharp downturn, sparking concern across financial markets globally. Analysts have been grappling with explanations for the collapse, with opinions ranging from the slowdown in China’s economy to a reactionary bubble burst in various sectors. Kazinform News Agency correspondent visited Astana Finance Day to find out from experts the main reason for the collapse.
Matthias Kruse, Managing Director at Lazard, highlighted the role of "carry trades" and Japan’s low yield environment as a potential trigger for the downturn. “The yield level in Japan, in comparison to the U.S. and European markets, remains very low. Investors have utilized this disparity for carry trades,” Kruse explained. Carry trades involve borrowing in countries with low interest rates, like Japan, to invest in higher-yielding assets elsewhere.
Kruse suggested that this practice may have led to the formation of market bubbles. “Solving these bubbles sometimes results in sharp reactions. We witnessed an example of this three or four weeks ago,” he said. However, Kruse also admitted that the exact reasons for the recent crash remain uncertain.
Timothy Bennett, Director and Chairman of the Board at AIX, pointed to a more straightforward explanation: a significant slowdown in China’s economy. “The financial markets often reflect the real economy. A slowdown in China signals a broader slowdown in the global economy,” Bennett stated.
Bennett also emphasized the growing pressure on key sectors within China, particularly property, which has faced tremendous strain. “The downturn in property is no surprise, given the challenges they’ve faced over the past few months,” he added.
While Japan’s economic policies were highlighted by Kruse, Bennett downplayed their impact on the broader Asian market collapse. “I don’t think there’s much influence from Japan in this instance. It’s more about the broader global shift from very accommodating monetary policies to tightening measures, which is changing valuations,” he explained.
Japan, after decades of maintaining low-interest rates, is now navigating a gradual shift toward monetary tightening. According to Bennett, while this may have some impact on local valuations, it is not the primary driver behind the Asian stock exchange's recent downturn.
Despite the ongoing uncertainty, financial experts agree that the recent collapse could serve as a broader indicator of deeper structural issues across major Asian economies. Markets, for now, remain in a cautious holding pattern, awaiting further clarity on both economic policy shifts and corporate performance across the region.
