Asian Stocks Follow Oil Lower as Chinese Shares Hit 13-Month Low

  • U.S. crude slips back below $30 a barrel after rebound
  • China capital outflows reached estimated $1 trillion in 2015

China Stocks Decline to 13-Month Lows

Asian stocks fell, halting a two-day rebound, as oil slipped back below $30 a barrel and China’s stocks tumbled to the lowest levels in 13 months amid concern capital outflows may accelerate as the economy slows.

The MSCI Asia Pacific Index declined 1.7 percent to 117.85 as of 1:40 p.m. in London, after capping its biggest two-day rally since October 2011. The Standard & Poor’s 500 Index halted two days of gains yesterday, with declines accelerating in the final hour of trading as crude extended its selloff. The impact of the rout in oil on markets and economy worldwide is coming to the fore, with shares and crude prices now the most correlated since 2013.

“The rally that we’ve seen looks more like a bit of short-covering,” Chris Green, an Auckland-based strategist at First NZ Capital Group Ltd., a brokerage and wealth management firm, said by phone. “This is not the time to be putting on risk. The primary risk is on the Chinese economy and how it evolves. There’s increasing uncertainty as to the ability of the Chinese authorities to arrest the volatility in their currency and equity markets. Concerns are increasing about oil’s weakness and its knock-on effects.”

China’s Shanghai Composite Index slumped 6.4 percent to its lowest close since December 2014. Some of the most-accurate forecasters predicted further declines. Huang Weimin, whose Chinese stock-index futures wagers returned more than 6,200 percent last year, said the Shanghai gauge could drop another 15 percent in the first half as slowing economic growth and a weaker yuan fuel capital outflows.

Outflows Jump

Outflows jumped in December, with the estimated 2015 total reaching a record $1 trillion, more than seven times higher than the whole of 2014 based on Bloomberg Intelligence data dating back to 2006.

Thomas Schroeder, the Bangkok-based founder and managing director of Chart Partners Group Ltd. who predicted in October that a rebound in Chinese stocks wouldn’t last, is sticking to a call that the selloff has further to go, with the Shanghai gauge sliding to 2,400.

The resumptions of concerns over China’s economy and plummeting oil ended a brief rally in risk assets sparked after the European Central Bank raised the prospect of more stimulus. Investors are increasingly focused on meetings of the Federal Reserve and Bank of Japan this week. People familiar with discussions in Tokyo say it’s a close call whether BOJ officials will vote to accelerate easing. Traders are predicting the Fed will hold interest rates steady.

Japan’s Topix index sank 2.3 percent after rising Monday to cap the first back-to-back gains this year. New Zealand’s benchmark gauge lost 0.5 percent, while Australian markets are closed for a holiday. Taiwan’s Taiex index slipped 0.8 percent. Singapore’s Straits Times Index fell 1.4 percent. Hong Kong’s Hang Seng Index dropped 2.5 percent, cutting off a two-day rally, while the Hang Seng China Enterprises Index also ended a rebound, retreating 3.4 percent.

Kospi Slides

South Korea’s Kospi index slid 1.2 percent on Tuesday. The nation’s growth rate retreated from a five-year high as a surge in property transactions that supported the economy earlier in 2015 fizzled out. Gross domestic product rose 0.6 percent in the fourth quarter from the previous three months, when it jumped by 1.3 percent, data from the central bank showed.

Cnooc Ltd. tumbled 7.2 percent in Hong Kong, pacing losses among energy producers after a 4.8 percent surge the previous day. CRRC Corp. plunged after China’s biggest maker of railway equipment announced plans to sell $600 million of convertible bonds. Samsung SDI Co. slumped 15 percent in Seoul after the supplier of lithium ion batteries posted an unexpected loss. Japanese exporters fell as the yen strengthened against the dollar for a second day, with Honda Motor Co. and Sony Corp. dropping more than 3 percent.

The regional benchmark gauge has lost more than 10 percent this year, buffeted by concerns about slowing growth in China and the rout in oil and other commodities. The Shanghai measure is down 22 percent, while Japan’s Topix has lost 12 percent.

Futures on the S&P 500 added 0.4 percent. The U.S. benchmark index dropped 1.6 percent on Monday as energy shares declined.

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