HONG KONG, China (AFP) — The spike in tensions between the world’s two superpowers over United States (US) House Speaker Nancy Pelosi’s planned visit to Taiwan has sent shivers through trading floors, compounding worries that Russia’s invasion of Ukraine could escalate into a wider war.
A possible meeting between Pelosi and Taiwanese President Tsai Ing-wen is sure to anger Beijing, which views the island as its territory and has said the White House was playing “with fire.”
Pelosi arrived in Kuala Lumpur on Tuesday, her second stop in an Asian tour, Malaysian state media reported. After Singapore and Malaysia, her itinerary includes stops in South Korea and Japan — but the prospect of a Taiwan trip has dominated attention.
Reports of the visit hit US stocks, with all three main indexes reversing an early rally to end in negative territory.
And Asia followed suit.
Hong Kong and Shanghai led losses, shedding around three percent, while Taipei was off about 1.8 percent. Tokyo was more than one percent lower, while Sydney, Seoul, Singapore, Wellington and Jakarta were also well down.
The benchmark Nikkei 225 index dropped 1.42 percent, or 398.62 points, to end at 27,594.73, while the broader Topix index lost 1.77 percent, or 34.62 points, to 1,925.49.
The dollar fetched 130.67 yen in late Tokyo hours, down from 131.32 yen in early Asian trade and from 131.61 in New York on Monday.
“Sell orders aimed at avoiding risks emerged” in Tokyo trade after losses on Wall Street, with the “rapid appreciation of the yen against the dollar amplifying a risk-off mood,” Okasan Online Securities said.
“Risk is mounting,” Stephen Innes of SPI Asset Management said.
“As Pelosi is almost sure to visit Taiwan on Tuesday, now it is in China’s hands to see if the situation escalates,” he said, adding that while “it could be little more than a tempest in a teapot still, international and Taiwan investors are pretty concerned.”
“No party wants a real war, but the risk of mishap or even aggressive war game escalation is real, which could always lead to a tactical mistake.”
Traders were already skittish after a string of data showed economies beginning to take a hit from surging inflation and central bank interest rate hikes aimed at taming prices.