Asian shares drop on US concerns

<p>Investors are worried growth in emerging markets could soon be damaged.</p>

Asian stock markets have fallen in value today (January 27th), with investors increasingly concerned about the impact of money easing policies in the US.

Investors are growing worried that emerging markets could see their growth damaged as a result of the US becoming more relaxed about its monetary policy as it continues its recovery from the recession.

Stock indexes in Japan, Hong Kong and South Korea were all down, with the Nikkei slipping back by 2.1 per cent, while the Hang Seng fell by two per cent and the Kospi dropped 1.3 per cent.

"Everyone was reminded about last May's turmoil when investors unwound their positions in emerging markets on worries about [the] Fed's tapering," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

Emerging markets

Currencies and stocks could both be affected if the US continues to scale back its quantitative easing scheme in the coming weeks and months. The intentions of the new chair of the US Federal Reserve Janet Yellen, who replaced Ben Bernanke as the head of the organisation, are yet to be made clear. Ms Yellen was backed by US president as she targeted the role.

The peso in Argentina is among the currencies to have been hurt in recent weeks, with it dropping 11 per cent in the course of one day last week and experiencing its largest daily fall in over a decade when compared to the US dollar.

Investors have also been keeping a close eye on the Turkish lira, which has fallen down to an all-time low in recent weeks as the country's economy goes through a sticky period of recovery from the global financial crash.

Falling stock markets in Asia and weakening currencies in emerging markets around the world could see investors turn back to gold, which lost over 30 per cent of its value over the course of 2013 but has bounced back since the turn of the year.

Financial spreadbetters predicted the drop in Asian stocks would be replicated across Europe, with forecasts laid out that Britain's FTSE 100 would open down as much as 1.3 per cent.

Learn about the Asian markets and CFD trading at City Index

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.