Asia markets extend declines; Nikkei down 3.49%, Hang Seng drops 3.68%
Asian stocks tumbled Wednesday, with major indexes declining by more than 1 percent each, as global sentiment remained low on concerns over economic growth, China and low oil prices.
“The frailty in the Chinese growth remain the core problem for investors and the spotlights are not moving away from it anytime soon,” Naeem Aslam, chief market analyst at AvaTrade, said in a note Wednesday.
Overnight, the International Monetary Fund (IMF) cut its global growth forecast for 2016 to 3.4 percent, from 3.6 percent. The organization cited slower growth in emerging markets, especially in China, falling commodity prices, and rising interest rates in the U.S. as potential risks to global growth.
Markets in China opened in negative territory, following a 3.5 percent gain in the previous session after Beijing released a slew of data including the full-year growth number for 2015. The Shanghai composite was down 1.15 percent and the Shenzhen compositedeclined by 1.10 percent. The CSI300 was down 1.64 percent. Hong Kong’s Hang Seng index was down 3.77 percent.
The Chinese economy grew by 6.9 percent in 2015, according to official data, down from 2014’s 7.3 percent, and the slowest pace of economic expansion since 1990.
Some analysts believe further intervention and economic stimulus from Beijing are forthcoming as the country juggles a structural re-balancing act.
Cynthia Kalasopatan from Mizuho Bank said in a morning note, “Soft growth momentum led to expectations that Chinese authorities will need to implement further policy easing to support the economy.”
“More policy and RRR cuts may be in the pipeline,” she added, “What’s more, targeted fiscal tools may be used as well to spur growth.”
The People’s Bank of China (PBOC) said late on Tuesday it would inject more than 600 billion yuan ($91.22 billion) into the financial system tohelp ease a liquidity squeeze expected before the Lunar New Year holiday in early February.
Bucking the trend on the Shanghai index, state-owned China Communications Construction climbed 7.71 percent and China Power Construction added 2.82 percent.
But bank and property shares were sharply lower. Bank of China’s Hong Kong-listed shares dropped 1.97 percent and its Shanghai-listed ones fell 1.70 percent. Hong Kong-listed Shimao Property dropped 6.02 percent.
Before market open, the PBOC set the yuan mid-point rate at 6.5578, maintaining stability following the previous session’s fix of 6.5596.
Elsewhere, the China Securities Regulatory Body (CSRC) said it approved several initial public offerings (IPOs) under its revised rules, which took effect on Jan. 1, under which investors are no longer required to put up a capital subscription process, according to reports. The resumption of IPOs has been a concern as they tend to sop up market liquidity.
Elsewhere in Asia, Japan’s Nikkei 225 dropped 3.49 percent, while in South Korea, the Kospi extended losses to trade down 2.32 percent.
The dollar-yen pair was lower by 0.37 percent at 117.18. Major Japanese export stocks, such as Toyota, Nissan, Honda and Sony were down between 3.20 and 7.69 percent. A stronger yen is usually considered negative for Japan’s exporters as it dampens earnings when translated back into the home currency.
Sharp was down 3.97 percent after rising 2.4 percent Tuesday. A Japanese state-backed investment fund is reportedly considering investing 300 billion yen ($2.5 billion) in the electronics maker to assist its restructuring plan. Japan Times, citing sources, said Tuesday that Taiwan’s Hon Hai Precision Industry, also known as Foxconn, had also presented plans to invest around 500 billion yen in Sharp.
South Korea’s major blue chip stocks were mostly down, with shares ofSamsung Electronics and Posco declining 2.56 and 3.63 percent respectively.
Kepco retraced gains of as much as 0.78 percent to trade down 0.19 percent. Reports said on Tuesday that South Korea’s Hanul No.1 nuclear power reactor was automatically shut down due to a technical problem. Reuters, citing the country’s nuclear reactor operator Korea Hydro & Nuclear Power, which is owned by Kepco, said there was no radiation leak and that things were in a stable condition.
Australia’s market tumbled, with the main ASX 200 closing down 61.56 points, or 1.26 percent, at 4,841.50 points, its lowest finish since July, 2013. The index is also down 19.07 percent from its 52-week high of 5,982.69 set April, 2015, indicating the market is nearing bear territory. Financials, energy and materials sectors weighed heavily on the index, with those subindexes down between 1.94 and 3.86 percent.
Among the big resources producers Down Under, shares of Rio Tintoand BHP Billiton finished 2.76 and 3.53 percent lower respectively.
BHP trimmed its full-year forecast for iron ore production by 10 million tonnes to 237 million tones, following a mining disaster at its Samarco joint venture in Brazil, where output is suspended.
Oil prices also remained under pressure from a global supply glut.
Tim Condon from ING said in a note that the “feel-good factor from China data,” which saw Asia shares end higher in Tuesday’s session, faded in the U.S. trading session as “oil prices took another lurch lower” and the IMF issued another gloomy warning over global growth prospects.
“Falling global oil prices,” Condon noted, “now are perceived to be due to an excess supply of oil rather than a China hard landing, making them a third source of global financial market volatility along with China and Fed policy uncertainty.”
The International Energy Agency said on Tuesday oversupply continues to put a strain on the oil market as producers brace for potentially as many as 500,000 additional barrels of oil per day from Iran.
During Asian trade, the West Texas Intermediate (WTI) futures were down 1.86 percent at $27.93 a barrel, touching levels under $28 for the first time since 2003. Globally traded Brent futures were down 0.83 percent at $28.52 a barrel after seeing marginal gains during the U.S. session to close up at $28.88.
Energy plays were mostly negative, with Woodside Petroleum closing down 2.76 percent, Santos declining 7.46 percent, Inpex sliding 4.55 percent, Japan Petroleum down 3.75 percent and S-Oil down 0.39 percent. Oil Search, which was up by as much as 0.43 percent, retraced gains to finish 1.56 percent lower.
Hong Kong-listed shares of CNOOC, Petrochina and Sinopec were down between 5.71 and 6.00 percent. Mainland shares of China Petroleum, Petrochina, and China Oilfield were down between 1.15 and 1.76 percent.
Major markets in the U.S. closed mixed on Tuesday, after returning from a Monday public holiday.
The Dow Jones industrial average finished up 27.94 points, or 0.17 percent, at 16,016.02. The S&P 500 gained 1 point, or 0.05 percent, to 1,881.33, while the Nasdaq composite declined 11.47 points, or 0.26 percent, to 4,476.95.
Source: CNBC – Asia markets extend declines; Nikkei down 3.49%, Hang Seng drops 3.68%
