Asia Stocks Extend Worst Start to Year Since 1988 on China Woesby
Investors whipsawed as China intervenes to buy equities
Japan, Hong Kong fall while Shanghai recovers most of its loss
Asian stocks fell, extending the worst start to a year since 1988, as investors were whipsawed in a volatile session punctuated by Chinese authorities’ efforts to stabilize markets.
The MSCI Asia Pacific Index slid 0.3 percent to 128.47 as of 4:12 p.m. in Hong Kong after fluctuating between gains and losses. The largest swings came in Shanghai, with the benchmark index climbing 1 percent, plunging as much as 3.2 percent and then recovering almost all those losses in the final hour. The gyrations came after a 7 percent tumble in the CSI 300 Index on Monday triggered a market-wide trading halt, spurring a global selloff.
China moved to support its sinking stock market as state-controlled funds bought equities and the securities regulator signaled a selling ban on major investors will remain beyond this week’s expiration date, according to people familiar with the matter. The moves show that policy makers, who took unprecedented measures to prop up stocks during a summer rout, are stepping in once again to combat a selloff that erased $590 billion of value in the worst-ever start to a year for the Chinese market.
“Investors will prefer to stay on the sidelines to process these events in China,” Jonathan Ravelas, chief market strategist at BDO Unibank Inc., said in Manila. “China’s reassurance is soothing some nerves but the volatility will continue.”
Asian equities are reeling from the first back-to-back annual losses in a decade amid concern weakening Chinese growth and tighter U.S. monetary policy will choke off an earnings expansion. Global equities had their worst inaugural session in at least three decades on Monday and the MSCI Asia Pacific index slumped 2.3 percent, the most in three months.
The Shanghai Composite Index climbed back from the worst of its intraday declines Tuesday to finish with a 0.3 percent loss. The index has retreated 7.1 percent in the first two trading days of the year. At one point Tuesday, its slide more than wiped out the gauge’s 9.4 percent rally for all of 2015.
Hong Kong sustained bigger losses Tuesday. The Hang Seng Index slid 0.7 percent, while the Hang Seng China Enterprises Index of mainland shares traded in the city fell 1 percent, adding to Monday’s 3.6 percent drop. Thomas DeMark, who correctly predicted the selloff in Chinese equities last year, says shares in Hong Kong are vulnerable to more losses.
“Investors need to be more cautious,” said Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion. “Growth remains a concern. How the year plays out is unclear, but the only surety is that volatility will increase.”
Elsewhere in Asia, Japan’s Topix index slipped 0.3 percent, with exporters seeing selling for a second day as the yen held near a two-month high. Toyota Motor Corp. lost 1.5 percent to be the biggest drag on the Topix, while soy sauce maker Kikkoman Corp., which gets 47 percent of revenue from North America, dropped 3.1 percent.
South Korea’s Kospi index increased 0.6 percent. Singapore’s Straits Times Index fell 0.5 percent and Taiwan’s Taiex Index lost 0.5 percent. Australia’s S&P/ASX 200 Index slumped 1.6 percent and New Zealand’s S&P/NZX 50 Index declined 0.7 percent for its first trading day of the year.
Futures on the S&P 500 added 0.1 percent. The underlying index closed 1.5 percent lower on Monday, paring an earlier decline of as much as 2.7 percent.
“There’s more easing ahead from the Chinese,” Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors Ltd., which oversees about $115 billion, said by phone. “I expect them to cut interest rates and/or the reserve-requirement ratio again. We’ve been reminded that volatility in financial markets remains high and that the global economy still needs monetary policy support.”