Asia markets steeply in the red, Nikkei in bear market

Kazuhiro Nogi | AFP | Getty Images

Asian stocks tumbled Wednesday, with Japan's Nikkei entering the bear market, as global sentiment remains low on concerns over economic growth, China, and low oil prices.

"The frailty in the Chinese growth remain the core problem for investors and the spotlights are not moving away from it anytime soon," Naeem Aslam, chief market analyst at AvaTrade, said in a note Wednesday.

Overnight, the International Monetary Fund (IMF) cut its global growth forecast for 2016 to 3.4 percent, from 3.6 percent. The organization cited slower growth in emerging markets, especially in China, falling commodity prices, and rising interest rates in the U.S. as potential risks to global growth.

Australia's ASX 200 slipped 61.56 points, or 1.26 percent, to 4,841.50 points, its lowest finish since July 2013. The index is also down 19.07 percent from its 52-week high of 5,982.69, set April 2015, indicating the market is nearing bear territory. The financial, energy and materials sectors weighed heavily on the index, with those subindexes down between 1.94 and 3.86 percent.

In Japan, the Nikkei 225 closed 632.18 points, or 3.71 percent, lower at 16,416.19, off by 21.33 percent from its 52-week high of 20,868.03 set June 2015. This officially puts the index in bear market territory.

South Korea's Kospi was down 44.19 points, or 2.34 percent, at 1,845.45, off by about 15.08 percent from its 52-week high of 2,173.41, set April 2015.

In China, the Shanghai composite fell 31.22 points, or 1.04 percent, to 2,976.51, while the Shenzhen composite was down 19.44 points, or 1.02 percent, at 1,876.30. The CSI300 lost 48.74 points, or 1.51 percent, to close at 3,174.37.

Away from the mainland, Hong Kong's Hang Seng index dropped 3.45 percent to a three-and-a-half year low, amid concerns over its currency's peg to the dollar.

Expectations of further stimulus from Beijing

The Chinese economy grew by 6.9 percent in 2015, according to official data, down from 2014's 7.3 percent, and the slowest pace of economic expansion since 1990.

"The good news was that policymaking was sufficiently adroit to offset an unexpected adverse shock to exports and manufacturing from the energy price crash in 2014 for growth to hit the 'about 7 percent' target," Tim Condon, head of research for Asia at ING, said in a note Wednesday. "The bad news was that economic momentum slowed in December."

The People's Bank of China (PBOC) said late on Tuesday it would inject more than 600 billion yuan ($91.22 billion) into the financial system to help ease a liquidity squeeze expected before the Lunar New Year holiday in early February. Before market open, the PBOC set the yuan mid-point rate at 6.5578, maintaining stability following the previous session's fix of 6.5596.

Elsewhere, the China Securities Regulatory Body (CSRC) said it approved several initial public offerings (IPOs) under its revised rules, which took effect on Jan. 1, under which investors are no longer required to put up a capital subscription process, according to reports. The resumption of IPOs has been a concern as they tend to sop up market liquidity.

Bucking the trend on the Shanghai index, state-owned China Communications Construction climbed 8.38 percent and China Power Construction added 1.97 percent.

But bank and property shares were sharply lower. Bank of China's Hong Kong-listed shares dropped 1.97 percent and its Shanghai-listed ones fell 1.98 percent. Hong Kong-listed Shimao Property dropped 5.85 percent.

Major Asian stocks see sell-off

Symbol
Name
Price
 
Change
%Change
NIKKEI
---
HSI
---
ASX 200
---
SHANGHAI
---
KOSPI
---
CNBC 100
---

The dollar-yen pair was lower by 0.94 percent at 116.51. Major Japanese export stocks, such as Toyota, Nissan, Honda and Sony closed down between 3.38 and 7.97 percent. A stronger yen is usually considered negative for Japan's exporters as it dampens earnings when translated back into the home currency.

Sharp was down 3.97 percent after rising 2.4 percent Tuesday. A Japanese state-backed investment fund is reportedly considering investing 300 billion yen ($2.5 billion) in the electronics maker to assist its restructuring plan. Japan Times, citing sources, said Tuesday that Taiwan's Hon Hai Precision Industry, also known as Foxconn, had also presented plans to invest around 500 billion yen in Sharp.

Oil prices also remained under pressure from a global supply glut.

Condon from ING said that the "feel-good factor from China data," which saw Asia shares end higher in Tuesday's session, faded in the U.S. trading session as "oil prices took another lurch lower" and the IMF issued another gloomy warning over global growth prospects.

"Falling global oil prices," Condon noted, "now are perceived to be due to an excess supply of oil rather than a China hard landing, making them a third source of global financial market volatility along with China and Fed policy uncertainty."

WTI drops below $28

The International Energy Agency said on Tuesday oversupply continues to put a strain on the oil market as producers brace for potentially as many as 500,000 additional barrels of oil per day from Iran.

During Asian trade, the West Texas Intermediate (WTI) futures were down 3.37 percent at $27.50 a barrel, touching levels under $28 for the first time since 2003. Globally traded Brent futures were down 2.12 percent at $28.14 a barrel after seeing marginal gains during the U.S. session to close up at $28.88.

Energy plays were mostly negative, with Woodside Petroleum closing down 2.76 percent, Santos declining 7.46 percent, Inpex sliding 6.21 percent, Japan Petroleum down 4.68 percent and S-Oil down 1.54 percent. Oil Search, which was up by as much as 0.43 percent, retraced gains to finish 1.56 percent lower.

Hong Kong-listed shares of CNOOC, Petrochina and Sinopec were down between 4.99 and 6.00 percent. Mainland shares of China Petroleum, Petrochina and China Oilfield closed mixed between down 0.88 and up 0.54 percent.

Commodity players remained under pressure. Among the big resources producers Down Under, shares of Rio Tinto and BHP Billiton finished 2.76 and 3.53 percent lower respectively.

BHP trimmed its full-year forecast for iron ore production by 10 million tonnes to 237 million tones, following a mining disaster at its Samarco joint venture in Brazil, where output is suspended.

South Korea's major blue chip stocks were mostly down, with shares of Samsung Electronics and Posco declining 2.82 and 4.23 percent respectively by the market close.

Kepco retraced early gains of as much as 0.78 percent to close down 0.19 percent. Reports said on Tuesday that South Korea's Hanul No.1 nuclear power reactor was automatically shut down due to a technical problem. Reuters, citing the country's nuclear reactor operator Korea Hydro & Nuclear Power, which is owned by Kepco, said there was no radiation leak and that things were in a stable condition.

Major markets in the U.S. closed mixed on Tuesday, after returning from a Monday public holiday.

The Dow Jones industrial average finished up 27.94 points, or 0.17 percent, at 16,016.02. The S&P 500 gained 1 point, or 0.05 percent, to 1,881.33, while the Nasdaq composite declined 11.47 points, or 0.26 percent, to 4,476.95.

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