Asia-Pacific markets’ ‘overblown’ fears of US recession led to needed correction: analysts

Japanese stocks suffered the biggest one-day drop since 1987 on Monday, while the Australian stock market’s ASX 200 was pummelled following disappointing employment figures from the US last week that led to concerns the data all but confirmed a recession was under way.

But economists said much of this was “noise”.

“The worry of a recession is somewhat overblown. Yes, we have seen a softening in labour market conditions, in hiring, but you have to soften, because that’s what the tighter monetary policy is supposed to achieve,” said Song Seng Wun, an economic adviser at the financial services firm CGS.

“We’re not talking about a sharp deceleration in the employment numbers, hiring is still taking place.”

Job losses and corporate bankruptcies have been some of the biggest economic concerns stemming from the current tight monetary policy approach taken by central banks globally since the pandemic ended.

Such tight policies are aimed at tackling inflation and excessive demand from fully employed economies – particularly through high interest rates – but they could go too far, which analysts said prompted the jitters in global markets in recent days.

Globally, corporate insolvencies have been on the rise, with Australia and New Zealand posting some of the biggest increases in Asia-Pacific.

While the number of corporate bankruptcies in Hong Kong has not reached pre-pandemic highs, they are on the rise, the island’s statistics show. The same can be said for South Korea.

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“As of mid-2024, most countries have been reporting a continuous upside trend in business insolvencies, supporting our forecast for a noticeable increase in half of the countries globally,”