Asian Stocks Head for Lowest Close Since 2012 as Shanghai Slumps

  • China equities defy central bank prediction rout is ending
  • Topix reverses losses to close higher in volatile trading

Asian stocks fell, with the regional benchmark index heading for its lowest close since November 2012, after Chinese equities slumped as trading resumed on the mainland following a four-day weekend.

Galaxy Entertainment Group Ltd. dropped 5.1 percent in Hong Kong, pacing declines among Macau casino operators, after Wells Fargo Securities said VIP gaming revenue in the former Portuguese enclave may not fully recover. Perusahaan Gas Negara Persero Tbk, an Indonesian supplier of natural gas, tumbled 11 percent in Jakarta after the government announced plans to cut prices. Ricoh Co. jumped 9.3 percent in Tokyo after Effissimo Capital Management Pte raised its stake in the maker of office automation equipment

The MSCI Asia Pacific Index dropped 0.5 percent to 124.16 as of 4:08 p.m. in Hong Kong. The gauge slumped 4.8 percent last week, capping its seventh weekly decline, as a contraction in Chinese manufacturing reinforced investor concern about the world’s second-biggest economy. The Standard & Poor’s 500 Index fell 1.5 percent on Friday after August payrolls data failed to provide clarity on the U.S. interest-rate outlook.

“Investors are increasingly concerned about the slowdown in the Chinese economy,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “There’s a lot of potential market-moving news in the next two weeks, including the possibility of a U.S. interest-rate hike this month. It might be time for investors to keep their seat belts on.”

China Reassurance

China worked to soothe concern over its economy at the Group of 20 gathering in Turkey at the weekend, with officials predicting stabilization in the currency and stock markets in the coming weeks. People’s Bank of China Governor Zhou Xiaochuan said in a statement that the rout in Chinese equities is close to ending, and that state intervention prevented systemic risk and stopped a free-fall.

Fed Bets

Friday’s U.S. payrolls report showed that while wages and the number of hours worked increased last month, the economy added fewer workers than expected, leaving bets on a rate hike in September around 30 percent. International Monetary Fund chief Christine Lagarde emphasized that the Federal Reserve must be certain the U.S. can handle higher rates given the impact monetary tightening will have on the global economy.

China’s Shanghai Composite Index dropped 2.5 percent amid speculation state-backed funds had stopped buying. Large-company shares had rallied in late trade for six straight days on speculation government funds intervened to stabilize the market before last week’s holiday break.

The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong lost 0.7 percent, while the city’s benchmark Hang Seng Index slipped 1.2 percent. China releases trade data on Tuesday and inflation numbers on Sept. 10.

The Jakarta Composite Index dropped 2.5 percent. Singapore’s Straits Times Index lost 0.2 percent. Taiwan’s Taiex index, South Korea’s Kospi index and Australia’s S&P/ASX 200 Index each fell 0.2 percent. New Zealand’s NZX 50 Index added 0.5 percent. Japan’s Topix index gained 0.1 percent, reversing losses of as much as 1.9 percent in volatile trading. India’s S&P BSE Sensex index retreated 0.3 percent.

E-mini futures on the S&P 500 gained 0.8 percent. U.S. markets are closed Monday for a public holiday.

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