China stocks close 6.4% lower as sinking oil drags down Asia markets
Beijing (Jan 26) China shares plunged Tuesday, while other Asian markets dropped as oil prices sank. The Shanghai Composite Index SHCOMP, -6.42% , China’s main benchmark, finished down 6.4% at 2,749.79.
That was the index’s largest one-day percentage loss since the Chinese government got rid of a “circuit breaker” mechanism on Jan. 8. The system, put into place at the beginning of the year, was blamed for sparking rather than stopping volatile trading.
The Shanghai index closed below 2,800 for the first time since December 2014. It is now down 47% from its June peak.
Investors are worried about capital outflows from China, and sentiment has been very weak ahead of China’s Lunar New Year starting Feb. 7, said Steven Wang, director at Hong Kong-based Reorient Group. “People are looking for support at 2500,” he noted.
China’s Nasdaq-style ChiNext benchmark 399102, -7.78% plunged 7.8%, while the Shenzhen Composite Index 399106, -7.12% closed down 7.1%.
In Hong Kong, the energy sector plunged 5.8%, dragging down the Hang Seng Index HSI, -2.48% by 2.4%. The Hang Seng China Enterprises Index HSCEI, -3.40% of Chinese firms trading in Hong Kong dropped 3.5% at 7,891.98. That benchmark hit a closing low of 7,835 last Thursday, and currently trades at its lowest levels since 2009.
The Nikkei Stock Average NIK, -2.35% closed down 2.4%, with Tokyo-listed oil developer Inpex Corp. 1605, -4.31% down 4.3%.
South Korea’s Kospi SEU, -1.15% was down 1.2%. Markets in Australia and India are closed for holidays.
The same concerns that have haunted stocks this year remain: Oil prices CLH6, -0.13% are trading near multiyear lows, and investors are worried about a slowing China and plans by the U.S. Federal Reserve to raise interest rates. But increasingly, the oil market is driving the action.
“The volatility [in oil] is not helping restore confidence back in the market,” said Robert Levine, head of Asian sales and trading at brokerage CLSA. “It’s not easy to put on new bets.”
Brent crude oil LCOH6, +0.13% gave up gains earlier in Asia to trade down 2.6% at $29.72 a barrel. Brent oil has now fallen more than 20% this year.
But oil’s losses haven’t helped airlines, which usually benefit from lower costs on oil. China Southern Airlines Co. Ltd. 600029, -6.68% and Japan Airlines Co. Ltd. 9201, -0.63% slipped a fraction on Tuesday, leaving them down 22% and 2% respectively year-to-date.
Worries about slower global growth are overshadowing the benefits of lower oil, explained Levine.
In Japan on Tuesday, shares were getting pressure from the Japanese yen, which strengthened by 0.4% to ¥117.76 per U.S. dollar.
But no stock exchanges in Asia suffered the losses of China, where the CSI 300 000300, -6.02% , a benchmark of blue chip stocks, was down 6%. That would have been enough to trigger the old circuit breaker, which kicked in with a 15-minute trading halt if the benchmark fell by 5%, followed by a trading stop for the day if the decline widened to 7%.
The circuit breaker stopped trading early two times: on Jan. 4, the first trading day of the year, and Jan. 7.
Source: MarketWatch
