Asia markets collapse after Britain votes to leave EU

Asian stocks have plunged and oil prices have been hammered as Britain’s result became clear.

Markets crashed as the BBC called the Brexit vote result.

Britain’s vote to leave the European Union sent reverberations through to Asian markets on Friday, where investors were the first to react as it became clear a shock result was in the offing.

Traditional safe-haven assets like the yen and gold jumped higher, but Japanese shares led a slump in regional stock markets. The Nikkei Stock Average closed down 7.9 per cent, its steepest one-day loss for five years.

Earlier in the afternoon, Tokyo stocks had plunged as much as 8.5 per cent, as Asian forex and equity markets swung wildly on news from the EU referendum.

While the UK isn’t a huge export market for most Asian countries, several companies in the region have made heavy investments there.

In Japan, industrial conglomerate Hitachi Ltd. dropped 10.3 per cent, while advertising agency Dentsu Inc. slumped by 12.5 per cent and auto maker Nissan Motor Co. Ltd. fell 8.1 per cent.

Hong Kong-listed shares in British banks HSBC PLC and Standard Chartered PLC dropped by 6.6 per cent and 9.5 per cent respectively, leading the Hang Seng Index down 2.9 per cent.

Investors were gripped by broader fears about global growth on the back of the UK’s “Leave” decision. The British pound was the biggest casualty, dropping to its lowest level in more than 30 years against the US dollar. Oil prices slipped back by around 4 per cent.

Elsewhere, there was a flight to safety. Gold rose above $US1,300 a troy ounce, up over 4 per cent. The yield on the Japanese 10-year government bonds meanwhile dropped to minus 0.199 per cent, close to its record low reached earlier this month, while the yield on 30-year government bonds slid to a historic low of 0.132 per cent, according to Reuters. Bond yields move inversely to prices.

“It’s not just a UK story now,” said Ludovic Colin, a senior portfolio manager at Vontobel Asset Management Inc.

While most fund managers had said they hadn’t ruled out a “Leave” scenario ahead of the referendum, there had been a tilt toward bets on a vote for “Remain” in recent days, according to bookmakers and opinion polls. As tallies trickled in throughout the Asian trading day, investors across the region had to quickly change their expectations.

“When I came in this morning it looked as if the market had decided it was a done-and-dusted deal, and the UK was going to vote for a landslide ‘Remain,’ despite the polls showing it was going to be a close-run thing,” said Stuart Ive, a private client manager at OM Financial in Wellington, New Zealand.

However, as results started coming in it became clear just how “exceptionally close” the vote would become. “Things are a lot closer than these markets had priced in.”

Japan’s currency, the yen, reached its strongest level since November 2013, at 99 yen to the US dollar during the Asian morning, though it fell back later in the day. The move in the yen prompted Japan’s top currency official, Masatsugu Asakawa, to say that the authorities there would consider responses as needed.

“At least half of the market was anticipating the UK to remain,” said Ichiro Yamada, general manager of the equities department at Fukoku Mutual Life Insurance.

Traders skipped breakfast and stayed glued to their screens through lunch time as the drama in markets unfolded.

Stephen Innes, a senior trader at Oanda Asia Pacific, arrived early Friday morning to his trading desk in Singapore. “I was in about 3:30 a.m., so I was actually 30 minutes late,” he joked.

For the next several hours, a colleague brought him coffee about every 15 minutes as he handled calls for market comments and online client orders.

“The shifting sentiments are quite exciting for traders,” he said.

Later, as most Asian markets were closing, the damage looked set to spread through global markets. Futures in the US pointed to a drop of nearly 5 per cent for the S&P 500.

“Meltdown maybe too strong a world, but you’re certainly going to see a lot of stress globally in the coming days,” said Vontobel’s Mr. Colin. “It’s going to be repetition of what we saw earlier this year in terms of volatility and stress.”

WithDow Jones newswires,AFP, AAP