Asian stocks dropped for a fifth day as Chinese shares extended Monday’s slump. Commodity companies and consumer firms led the fall.
The Shanghai Composite Index lost 1.7 percent for a two-day 10 percent slide as investors questioned the government’s ability to prop up shares. Nitto Denko Corp. retreated 4.1 percent in Tokyo after profit missed analyst estimates. Toyota Motor Corp. and Mitsubishi UFJ Financial Group Inc. each declined more than 1 percent, the biggest drags on the regional gauge.
The MSCI Asia Pacific Index declined 0.5 percent to 140.26 as of 4:20 p.m. in Hong Kong, extending its five-day fall to 3.5 percent. Chinese policy makers said they haven’t withdrawn support, after the Shanghai Composite plunged the most in eight years on Monday. Still, investors remained concerned that financial-market turmoil will curb growth in the world’s second-largest economy, and bolstered speculation the Federal Reserve will keep U.S. interest rates lower for longer.
“Extreme caution is needed here,” said Matthew Sherwood, Sydney-based head of investment strategy at Perpetual Ltd., which manages the equivalent of $24 billion. “The return of market volatility in China will be a significant discussion point at the U.S. Fed. in terms of what this is telling us about the Chinese economy. There is a lot of global weakness and significant external risk.”
Hong Kong’s Hang Seng Index climbed 0.6 percent, after dropping to its lowest level in three weeks on Monday. The Hang Seng China Enterprises Index slid 0.5 percent. The CSI 300 Index retreated 0.2 percent, erasing most of an earlier decline as steep as 5 percent.
Chinese traders reduced leveraged stock bets on Monday by the most in two weeks as the stock plunge erased $613 billion in value. The securities regulator assured investors in a statement after the market closed the government hasn’t withdrawn support for equities.
“Valuations remain fairly high and there are still people who lost money in the second quarter and who’d like to get out but they can not,” Dariusz Kowalczyk, a strategist at Credit Agricole CIB, told Bloomberg TV in Hong Kong. “The government continues to believe they have to stabilize the equity market.”
The probability that the Fed will increase its benchmark rate at its September meeting fell to 37 percent from 40 percent on Monday, according to futures data compiled by Bloomberg. The central bank has kept its benchmark in a range between zero and 0.25 percent since December 2008 to spur growth.
Fed Chair Janet Yellen, who will oversee a two-day Federal Open Market Committee meeting beginning on Tuesday, reiterated in congressional testimony this month that that she expects the central bank to raise its benchmark rate this year, while emphasizing that the pace of increases will likely be gradual.
Japan’s Topix index declined 0.5 percent. Singapore’s Straits Times Index slid 0.8 percent and South Korea’s Kospi index was little changed. Australia’s S&P/ASX 200 Index slid 0.1 percent and New Zealand’s NZX 50 Index lost 0.4 percent.
The China Securities Regulatory Commission will continue to “stabilize” the market and “prevent systemic risk,” spokesman Zhang Xiaojun said in a statement on Monday. He was responding to media reports saying the government was pulling back from support measures adopted after China’s stock market began tumbling last month, according to the statement.
The International Monetary Fund recently urged China to unwind its support measures, saying share prices should be allowed to settle through market forces, a person familiar with the matter said last week.
E-mini futures on the S&P 500 rose 0.3 percent after the underlying gauge on Monday fell 0.6 percent.
Read this next:
- Analyst Who Predicted Bottom for Shanghai Stocks Sees Further 14% Plunge
- China Stocks Extend Drop While Europe Futures Gain; Oil Retreats
- BofA: Get Ready for 'Relentless Selling' Pressure in Chinese Stocks