Japanese stocks plunged the most in more than two years, with the Topix index and the Nikkei 225 Stock Average entering corrections on elevated volume.
Real-estate and bank shares led declines, with Mitsubishi UFJ Financial Group Inc. sinking 8.3 percent. Toyota Motor Corp. fell 6.8 percent, the steepest single-day loss since the Fukushima nuclear meltdown more than four years ago, after extending a shutdown at its biggest source of production in China. An index of small-cap stocks in Tokyo dived 12 percent to the lowest since May 2014. Energy explorer Inpex Corp. dropped 4.2 percent as crude oil futures tumbled.
The Topix plunged 5.9 percent to close at 1,480.87 in Tokyo, joining a slump across Asia as a global rout deepened. The gauge fell the most since May 2013, bringing its loss to 12 percent since Aug. 10, on trading volume that was 78 percent above the 30-day average. The Nikkei 225 dropped 4.6 percent to 18,540.68, taking its retreat from a June high to 11 percent.
“Everyone is really surprised,” said Basil Dan, head of equity sales at Credit Suisse Group AG in Tokyo. “Long-only accounts are joining the selling and what’s standing out are Europe and U.S.-based pension funds, which up until now have almost never been sellers. Relatively speaking, Japan is looking attractive to other countries. But as globally we’re in a risk-off mode, we might not see any money flow in for a while.”
Exporters dropped as the yen strengthened 0.9 percent against the dollar after surging 1.9 percent last week. The Shanghai Composite Index plunged as much as 9 percent Monday, while U.S. shares on Friday fell by the most in almost four years.
Equities worldwide have lost more than $5 trillion in value since China’s shock yuan devaluation on Aug. 11, which spurred a slump in emerging-market currencies and fueled speculation that the slowdown in the world’s second-largest economy may be deeper than previously thought. While the Chinese government maintains a raft of unprecedented measures to support the equity market, officials are failing to convince investors that gains will be sustainable.
“You could say this is a test of how much trust President Xi Jinping can accumulate from the market,” said Ayako Sera, a Tokyo-based strategist at Sumitomo Mitsui Trust Bank Ltd. “If the Chinese economy keeps slowing like this, naturally it will impact the rest of the world. But the question is how much will it actually slow? That will be up to the government’s policies.”
Volatility surged in Tokyo, with the Nikkei Stock Average Volatility Index jumping 48 percent on Monday to the highest since July 2013. Nearly 4 billion shares on the Topix changed hands.
Banks and real-estate shares led declines among the Topix’s 33 industry groups. Mitsubishi UFJ sank 8.3 percent, while real-estate developer Mitsui Fudosan Co. fell the most since May 2013, dropping 8.3 percent.
Toyota tumbled 6.8 percent, the most since the Fukushima nuclear meltdown in March 2011. Losses were exacerbated after the automaker announced its biggest source of production in China would remain closed for at least two weeks, following deadly explosions in Tianjin this month.
Energy shares slid after crude U.S. oil futures fell to $39 per barrel, the lowest intraday price since February 2009, as Iran reiterated it will boost production and U.S. drillers showed no signs of slowing. Inpex tumbled to the lowest close in 18 months, while Japan Petroleum Exploration Co. sank 5.4 percent to the weakest level since January 2013.
Biopharmaceutical and Internet-related shares were among biggest decliners in the TSE Mothers Index of small-cap stocks, which slumped 12 percent. Cancer treatment developer OncoTherapy Science Inc. and Internet marketer Adways Inc. dropped at least 16 percent.
Futures on the S&P 500 tumbled 2.5 percent on Monday after the underlying measure last week capped the worst week since 2011. European shares entered a correction and stocks from Hong Kong to Indonesia fell into bear markets.