Asian Stocks Retreat as Shanghai Enters Bear Market, Oil Slides

  • Financial and energy shares lead losses on regional gauge
  • Crude resumes drop, heads for third straight weekly decline

Asian stocks fell, reversing earlier gains and reaching a three-year low, as Chinese shares slid back into a bear market and crude oil resumed its losses.

The MSCI Asia Pacific Index slipped 0.5 percent to 120.04 in Hong Kong after climbing as much as 1.1 percent. The gauge posted a 3.2 percent decline this week and is at its lowest since November 2012. The Shanghai Composite Index sank 3.6 percent on Friday, taking its decline from a December high to more than 20 percent as it wiped out gains from an unprecedented state rescue campaign. Concern about China’s economy continues to whipsaw markets in 2016, helping spur a $5.6 trillion stock selloff.

“A rebound in equities isn’t going to be sustainable until volatility comes down and until we get a sense that the Chinese economy is doing better or at least is moving in the right direction,” Herald van der Linde, Hong Kong-based head of equity strategy for the Asia Pacific at HSBC Holdings Plc, said in an interview from Singapore. “China’s economy is struggling to turn around."

Equities around the world are off to their worst start to a year on record as oil plummeted to levels last seen more than a decade ago and China struggled to maintain control over its markets. The MSCI Asia Pacific gauge has fallen 9.1 percent this year, while the Shanghai Composite has posted the biggest drop among 93 primary equity indexes tracked by Bloomberg.

Uncertainty, Risks

China’s new yuan loans slowed to 597.8 billion yuan ($90.8 billion) in December, trailing the 700 billion yuan median forecast, while M2 money-supply growth was 13.3 percent from a year earlier, compared to the median estimate for 13.6 percent, according to central bank data. Aggregate financing rose to 1.82 trillion yuan in December, the report showed.

“There’s just a lot of uncertainty and risks,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “While oil could be close to a bottom, the news out of China continues to get worse and we’ve still got geopolitical risks. There are selective investment opportunities but there are just as many risks out there.”

Hong Kong’s Hang Seng Index fell 1.5 percent on Friday, while the Hang Seng China Enterprises Index of mainland shares listed in the city slumped 2.6 percent.

Japan’s Topix index finished 0.3 percent lower after advancing as much as 1.9 percent. South Korea’s Kospi index dropped 1.1 percent. Singapore’s Straits Times Index slipped 0.5 percent, as did Australia’s S&P/ASX 200 Index. New Zealand’s S&P/NZX 50 Index increased 1 percent. Taiwan’s Taiex index gained 0.3 percent.

U.S. Stocks

The Standard & Poor’s 500 index dropped 2.3 percent. The U.S. equity benchmark index climbed 1.7 percent on Thursday led by oil and other commodity shares, as crude rebounded and metals gained.

Financial and energy shares led losses on the Asian regional measure Friday. West Texas Intermediate crude oil futures fell back below $30 a barrel amid signs Iran is moving closer to boosting exports.

Kawasaki Heavy Industries Ltd. tumbled 6.6 percent in Tokyo after saying it will cut its full-year profit forecast after booking a 22.1 billion yen ($188 million) impairment charge on a shipbuilding venture in Brazil. Noble Group Ltd. slipped 3.3 percent in Singapore, heading for a 12-year low, as the cost of protecting the commodity trader’s notes against non-payment climbed to the highest in Asia as the rout in raw materials deepened. Taiwan Semiconductor Manufacturing Co. rose 4.2 percent in Taipei after the maker of chips for Apple Inc. posted fourth-quarter profit that beat analysts’ estimates.

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