Stocks across Asia fell, led by a slump in Chinese equities, as initial public offerings drained cash from the market and investors speculated that recent gains have gone too far.
China’s Shanghai Composite Index slumped 3.7 percent, with the gauge headed for the steepest weekly loss since February 2009. Toyota Motor Corp. fell 1.5 percent in Tokyo, the largest drag on the regional index, as a strengthening yen pushed exporters lower. Commonwealth Bank of Australia sank 1.3 percent as lenders in Sydney declined.
The MSCI Asia Pacific Index was little changed at 146.23 as of 3:40 p.m. in Hong Kong as about two shares fell for each that rose ahead of a meeting between euro-area finance ministers amid a continued deadlock over aid for Greece. The Topix index slipped 1 percent before the Bank of Japan’s decision on monetary policy on Friday. Even after Thursday’s slide on the Shanghai Composite, the gauge is still up 48 percent this year.
“Stocks have risen too much and valuations have reached critical levels,” said Shen Zhengyang, a Shanghai-based analyst at Northeast Securities Co. “Anything that’s slightly negative can impact the market.”
Analysts are increasingly warning that Chinese stock-market valuations are excessive after the gauge more than doubled in the past 12 months to a seven-year high. IPOs this week will lure about 6.7 trillion yuan ($1.1 trillion) of bids, according to a Bloomberg survey of forecasters.
David Woo, the head of global rates and currencies research at Bank of America Corp., said the bubble in China stocks rivals the dot-com boom of the late 1990s and its eventual collapse will have consequences for markets around the world. A market crash may come within six months, Bocom International Holdings Co. said Tuesday, citing an analysis of global bubbles over 800 years.
Hong Kong’s Hang Seng Index slid 0.2 percent and the Hang Seng China Enterprises Index of mainland firms listed in the city dropped 1.1 percent.
In Hong Kong, twenty-eight lawmakers voted against a China-backed election plan, denying Chief Executive Leung Chun-ying the two-thirds majority needed for its passage. Most of the supporters in the 70-member legislature walked out just before the vote in a failed effort to deny a quorum, leaving only eight votes in favor. The rejection means that Hong Kong won’t hold the first-ever direct election of its chief executive in 2017 and leaves the current system in place.
E-mini futures on the Standard & Poor’s 500 Index were little changed after the underlying gauge added 0.2 percent on Wednesday following the conclusion of the Federal Reserve meeting. Fed Chair Janet Yellen on Wednesday said the pace of U.S. monetary-policy tightening will be gradual, with the central bank preparing to raise interest rates this year.
The Fed maintained its forecast for the benchmark rate to rise to 0.625 percent this year, while lowering its projection for 2016. A rebound in job growth is giving officials reason to look beyond a first-quarter economic slowdown as they consider when to tighten policy. At the same time, inflation remains below their target and central bankers say the timing of a rate increase depends on how economic data unfold.
“Any euphoria from the Fed meeting has been lost in Asia,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “The attention once again turns back to the Greek debt negotiations. Traders are keen to limit long-equity exposure until some sort of clarity around Greece emerges.”
Greece’s Prime Minister Alexis Tsipras said he’s ready to assume responsibility for the fallout of rejecting a deal with creditors, with talks among euro-area finance ministers to take place Thursday. Officials from the Netherlands, Portugal and Germany said they were bracing for a breakdown in talks that could roil the currency bloc.
Australia’s S&P/ASX 200 Index fell 1.3 percent and South Korea’s Kospi index advanced 0.3 percent. India’s S&P BSE Sensex Index rose 1.2 percent. New Zealand’s NZX 50 Index lost 0.5 percent after the country’s economy grew less than forecast in the first quarter.