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| An investor monitors and trades stocks at a securities exchange in Shanghai. China’s Shanghai Composite yesterday lost 2.9% to 2,774.57 for its biggest one-day percentage drop since a matching decline on January 20 |
China’s Shanghai Composite lost 2.9% to 2,774.57 for its biggest one-day percentage drop since a matching decline on January 20.
Japan’s Nikkei Stock Average was down 1.5%, Australia’s S&P/ASX 200 shed 1.9%, South Korea’s Kospi Composite was 2.6% lower, while Hong Kong’s Hang Seng Index fell 2.1%, and India’s Sensex lost 1.8%.
“I think the single biggest issue on the market psyche must be the European debt issue and I think it’s starting to unravel,” said Ben Collett, head of Japanese equities at Louis Capital Markets. “The next earnings season is still far away, but there is no reason to see that this is going to be a great quarter,” he added.
The day’s losses were accompanied by a sharp rise in the US dollar, often a sign investors are shunning risky assets in favour of those they see as safer. The euro, meanwhile, tumbled against the greenback and the Japanese yen, in the wake of Fitch’s downgrade of Greece’s debt ratings and Standard & Poor’s cut of its outlook on Italy’s rating on Friday.
Losses on Chinese bourses came after HSBC’s preliminary purchasing managers’ index fell to a 10-month low of 51.1 in May, from April’s final reading of 51.8. A reading above 50 indicates an expansion, and one below shows a contraction.
Hongbin Qu, HSBC’s chief economist for China said that despite the softening growth, there was “no need to worry about a hard landing” as the data were consistent with China’s increase in industrial production of around 13.0% and gross domestic product growth of about 9.0%.
However, “policy focus is still tilted towards taming inflation. We expect Beijing’s tightening policy will continue in the coming months,” he added.
China Life Insurance dropped 3.4%, China Shenhua Energy gave up 3.1% and Air China shed 4.6%.
The Chinese PMI also impacted some other regional markets, and in particular, heightened concerns in Australia that a slowdown in the world’s second-largest economy could hurt Australia’s resources sector.
BHP Billiton dropped 1.7%, Fox Resources shed 5.7% and Iluka Resources shed 3.7%.
South Korean automakers dragged on the Seoul market, after Hyundai Motor Group on Sunday said labour strife at a core engine parts supplier Yoosung Enterprise Co was disrupting its automobile production, and warned that a prolonged production halt at Yoosung could deal a major blow to it and other South Korean automotive industry players.
Japanese machinery stocks dragged the Nikkei lower, with Okasan Securities investment strategist Hideyuki Ishiguro attributing the drop to Nomura’s projection Friday of a fall in Chinese demand for construction machinery.
Elsewhere in the region, New Zealand’s NZX 50 finished 0.7% lower and Philippine shares fell 0.5%.