Asian markets are teetering as we head into December, traditionally one of the strongest times of the year for stocks. That's before we factor in the effects of Omicron, though, a "new unknown" that's giving the end of the year unusual weakness.
Asian shares rallied solidly on Wednesday, and are leading rather than following U.S. markets from day to day. But today's gains, while decent, don't offset the damage since traders first started to respond to word of the Omicron variant during Friday trade in Asia.
In fact, most Asian markets have suffered through a poor second half to 2021, and are trading at levels last seen near the start of the year.
South Korean stocks were the strongest in the region today, with the Kospi up 2.1%. It had fallen 5.0% since Thursday's close and first word of the new virus variant. That took the Seoul benchmark to its lowest levels since the very start of the year.
In Singapore, the Straits Times closed Wednesday on a 1.9% advance. It had dropped 4.7% between the end of trade Thursday and Tuesday's close. It is at similar levels to last March.
In Japan, the broad Topix index gained 0.4% on Wednesday. It is down 4.4% since Omicron reared its head, and has experienced double dips in October and now November, meaning it is bouncing around at much the same levels it first set in February.
In Hong Kong, the Hang Seng put on 0.8% by the close on Wednesday, having dropped 1.9% the day before. The sharp Tuesday fall took the index back below the 24,000 level, triggering some technical selling, and to its lowest ebb in more than a year, since September 2020.
The Hong Kong market peaked in February, and has now fallen 19.2% since June. In fact, if you had bought the broad Hong Kong market in March 2017 and just used a buy-and-hold strategy, you'd be sitting on zero gains.
Gambling stocks in Hong Kong sold off for a third straight day on Wednesday, following the arrest of Alvin Chau, the founder of the largest "junket operator" in Macau, Suncity Group Holdings (HK:1383). The company's penny shares were suspended today pending further announcements but fell 50.0% on Tuesday to a record low.
In response, Wynn Macau (HK:1128) (WYNMF) dropped another 8.6% on Wednesday, leading to a 23.9% decline since Thursday's close, and a 51.0% fall so far in 2021. Sands China (HK:1928) (SCHYF) sank 4.2% on Wednesday, is down 19.1% since Thursday, and off 49.5% this year.
Junket operators bring "whale" gamblers to Macau, arranging chips and access to VIP gambling rooms. The arrest of Chau and 10 others on suspicion of running an alleged syndicate enabling illegal cross-border gambling and laundering money threatens the entire premise of junkets. Suncity, which accounted for around 45% of the junket market, says it has shut down all its VIP rooms in Macau after Chau's arrest, with Chau stepping down from his positions with the company.
A spokesman for the Macanese police said the authorities launched an investigation in 2019 on the basis of allegations that Chau was using the Macau junket business to set up illegal online gambling sites in other countries, and encouraging Chinese nationals to gamble there. But it is technically illegal to solicit gambling at all in China, so junket operators operate in a grey area that the Chinese authorities appear intent on shutting down.
The South Korean market was last year's star performer in Asia. With a heavy influence from chipmakers and electronics exporters, chief among them Samsung Electronics (KR:005930) and rival SK Hynix (KR:000660), the Seoul market was a prime beneficiary from increased tech and gadget sales, and a nascent recovery in global trade.
Samsung rose 4.4% today, a key driver of today's gains, but even with that has still drifted 10.4% lower in 2021. Its smartphone growth has been sluggish, and investors are clearly wondering how long its strong semiconductor run, accounting for 55% of sales, can continue if stay-at-home demand wanes.
Taiwan was another outperformer last year, and continues to hold up well in 2021. The benchmark Taiex moved 0.9% higher today, meaning it is only 0.4% lower than before Omicron became a factor.
The Taipei market still sits on strong 18.0% gains in 2021, the best in Asia bar the surging Indian market. It's unusual for the Taiwan market to move out of synch with South Korean stocks, since both markets are dominated by chipmakers and electronics exporters. But earnings seem stronger in Taiwan, where other sectors such as healthcare, financials and industrial stocks have also stayed solid.
Another factor behind the divergence is that Korea's central bank and its counterpart in New Zealand are the first in the Asia Pacific region to raise interest rates. The Bank of Korea raised rates on Thursday for its second post-pandemic hike, and is likely to keep tightening throughout 2022.
In India, the Sensex ended Wednesday 1.1% higher. That leaves it still nursing a 2.0% decline since Thursday's close. But it's a blip in a stellar 2021, which leaves the Mumbai market up 20.5% so far this year, having set all-time highs in October.
