Asia Stocks Swoon; Japan, China Markets Plunge

Asian stocks swooned Thursday after uncertainty over U.S. monetary policy led to more declines on Wall Street, with Japanese shares standing out with massive losses as a further rally in the yen thrashed exporters.

The Nikkei Stock Average  plummeted 6.4% to end at 12,445.38 in Tokyo for its sixth loss in seven trading days. The drop marked the benchmark’s decline for a seventh straight Thursday, including the 7.3% plunge on May 23.

The selloff came as the U.S. dollar  fell as low as ¥93.76 during the session, nearly two full yen lower than the ¥95.61-level seen in North America late on Wednesday. The drop followed a third straight session of losses for U.S. stocks Wednesday, on concerns the Federal Reserve could taper down its bond purchases.

The dollar’s tumble against the yen “will put regional markets under pressure, but it may also [force] the U.S. Fed to reconsider its tapering plans in the face of a global sell off,” said Kim Eng Securities director of sales trading Andrew Sullivan.

Elsewhere in the region, Singapore’s Straits Times Index lost 0.7% in afternoon trade. The index had dropped much further earlier in the day to enter a so-called correction territory — widely regarded as a 10% drop from a recent peak. Stocks in some other Southeast Asian markets suffered much bigger losses, with the Philippine stock benchmark ending 6.8% lower, while Thailand’s SET slid 4.6% by late afternoon.

The losses Wednesday on Wall Street reinforced “the notion that the market is similar to a junkie who needs a constant fix, which in this case comes in the form of monetary stimulus,” said CMC Markets sales trader Miguel Audencial.

“Even a slight indication or the speculation that this stimulus will be scaled down may ignite a sell-off,” Audencial said.

Meanwhile, China’s Shanghai Composite tumbled 2.8% as the markets reopened for the first time this week after a string of holidays, giving investors a chance to react to a string of downbeat economic data released over the weekend, including the monthly trade and inflation figures.

Hong Kong’s Hang Seng Index skidded 2.2%, and South Korea’s Kospi  lost 1.4%.

Australia’s S&P/ASX 200  fell 0.6% to enter so-called correction territory — having dropped more than 10% from the highs reached in May. The benchmark declined despite official figures showing an unexpected improvement in employment trends during May.

Stock movers

In Japan, stocks found little respite as the U.S. dollar fell under the ¥94 level, raising more fears about the earnings outlook of companies with a significant international presence.

Shares of Fast Retailing Co.    skidded 8.6%, Hino Motors Ltd.  slumped 9.9%, Hitachi Construction Machinery Co.  plummeted 8.6% and Advantest Corp.   lost 9.4%.

“The combination of elevated risk aversion and disappointment over recent policy announcements, in particular the lack of detail about Prime Minister [Shinzo] Abe’s ‘third arrow,’ has prompted ever more upside for the [yen]” said Crédit Agricole forex strategy chief Mitul Kotecha.

Chinese property developers and banks suffered heavy losses during the session.

In Hong Kong, heavyweight stock China Construction Bank Corp.  lost 3.2% and China Overseas Land & Investment Ltd.   skidded 3.5%; in Shanghai, Poly Real Estate Group Co.  lost 4.5%, Citic Securities Co.   plunged 6.4% and shares of CCB  gave up 1.5%.

In Sydney, mining stocks came under pressure, with BHP Billiton Ltd.   lower by 2.6%, and Fortescue Metals Group Ltd.   sliding 3.4%.

Rio Tinto Ltd. shares   declined 2.4%. The company said it plans to sell its Eagle nickel and copper project to Lundin Mining Corp.

Source : Marketwatch