Asia Stocks Drop Most in Three Months as China Data Spur Selloff

  • China halts trading after 7% drop, worst start to a year
  • Japanese equities fall even as energy gains on oil rally

Asian stocks headed toward the biggest drop in three months as further signs of a slowdown in China sparked the worst start to a year for mainland equities, forcing regulators to halt trading for the rest of the day.

The MSCI Asia Pacific Index sank 2 percent, the most since Sept. 29, as of 4:07 p.m. in Hong Kong. The Shanghai Composite Index sank 6.9 percent while the CSI 300 Index plunged 7 percent, triggering the trading halt as new rules came into effect. Chinese shares listed in Hong Kong tumbled the most since August. Japan’s Topix index slid as the yen surged, while escalating tensions between Saudi Arabia and Iran lifted energy shares.

“Chinese and U.S. economic data weren’t strong, and there’s a new fire being kindled in the Middle East as well," said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo. “In the mid-to-long term, I’m not pessimistic on the stock market, but the ominous mood is a little unnerving."

The selloff in Asian equities comes after the regional benchmark index posted its first back-to-back annual losses in a decade. Brent crude tumbled 35 percent last year and the Bloomberg Commodity Index slumped 25 percent amid an oil supply glut and as Chinese economic growth slowed, pressuring equity markets and corporate profits.

Regional Gauges

The first economic reports in 2016 suggest concern over the world’s second-largest economy won’t easily dissipate. The China Caixin factory index came in at 48.2 in December, a report showed Monday, missing estimates for a reading of 48.9. On Jan. 1, official data signaled Chinese manufacturing weakened for a fifth month, the longest such streak since 2009.

China halted trading in stocks, futures and options shortly after 1:30 p.m. local time as circuit breakers designed to limit market swings were triggered on the first day the rules took effect.

Chinese shares listed in Hong Kong, where there is no circuit breaker, extended losses after the halt. The Hang Seng China Enterprises Index of mainland firms trading in the former British colony fell 3.6 percent at the close, the most since Aug. 24. The Hang Seng Index slipped 2.7 percent.

Japan’s Topix index fell 2.4 percent, after climbing 9.9 percent last year for a fourth straight annual gain, as the yen traded at the highest in more than two months. Australia’s S&P/ASX 200 Index lost 0.5 percent. South Korea’s Kospi index sank 2.2 percent. Singapore’s Straits Times Index declined 1.7 percent. New Zealand’s equity market was closed for a holiday.

Japanese Exporters

The stronger yen hurt the outlook for Japanese exporters, with Honda Motor Co. sliding 4.6 percent in Tokyo. Samsung Electronics Co. dropped 4.4 percent in Seoul after the maker of smartphones and memory chips warned of a challenging 2016. Inpex Corp. rose 2.2 percent, pacing the increase among energy producers as crude oil futures advanced as much as 3.5 percent before paring gains.

Saudi Arabia expelled the Islamic Republic’s diplomats from the country following an attack on its embassy in Tehran to protest the Saudis’ execution of a prominent Shiite cleric, marking the worst crisis in relations between the nations since the late 1980s.

Futures on the Standard & Poor’s 500 Index slid 1.5 percent on Monday. U.S. stocks fell on the final trading day of 2015, with the benchmark measure losing 0.9 percent to cap a 0.7 percent annual drop.

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