Asia stocks sink as China sell-off spreads

HONG KONG–Asian equities tumbled Wednesday as a collapse in Chinese shares began to contaminate other markets, and after European leaders slapped Greece with a deadline to submit fresh bailout reform proposals.

With markets buffeted by two global crises, traders ran for the cover of investments considered safe in times of upheaval such as the yen.

Shanghai plunged 5.90 percent, or 219.93 points, to end at 3,507.19 after losing more than eight percent at one point. The losses come despite Chinese leaders announcing fresh measures to staunch a correction that has wiped trillions off the country’s markets.

Tracking the regional downturn that followed the collapse in Chinese shares, the Philippine Stock Exchange index (PSEi) faltered for the fourth straight session, losing 79.22 points or 1.06 percent.

“A China meltdown is much more worrisome than Greece. China is our third-largest export destination, taking in some 12 percent of total exports,” said Victor Abola, economist at the University of Asia and the Pacific in the Philippines.

Wilson Sy, director at Philippine mutual fund management firm Philequity Management Inc., said he was concerned at what’s happening in China because a prospective hard landing would affect the rest of the world.

However, COL Financial head of research April Lee-Tan, said she was not very concerned over the slump in Chinese markets. “It is just correcting after rising by more than 100 percent since the middle of the year. So although you’ve lost quite a bit of wealth, you have actually only earned less than what you should have earned if you had sold at the peak.” she said. ”

“It might be too early to start pushing the panic button. The fall has just been happening over the past couple of weeks so it really depends on the reaction of the China central bank,” said Jose Mari Lacson, head of research at Manila-based Campos Lanuza & Co.

Hong Kong tanked 5.84 percent, or 1,458.75 points, to 23,516.56–its lowest close since the start of January. The decline was also the largest single-day loss since November 2008 at the height of the global financial crisis.

Most other regional markets were also hit by the spillover effect, as many host companies with links to China.

Tokyo sank 3.14 percent, or 638.95 points, to 19,737.64, Seoul slipped 1.18 percent, or 24.08 points, to 2,016.21 and Sydney retreated 2.01 percent, or 111.9 points, to 5,469.5.

“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch,” said Zheng Ge, an analyst at Wanda Futures Co.

Shanghai is down more than 30 percent from its closing peak on June 12, when it had risen by more than 150 percent in 12 months in a borrowing-fueled frenzy enhanced by hopes for economy-boosting government measures.

However, analysts said new restrictions on margin trading and concerns about the overvaluation of many stocks have forced mainland investors–mostly individual retail traders–to cash out.

There are now fears that the hammering to stock markets will hit the wider Chinese economy, the world’s second-biggest, which is already struggling with slowing growth.

Wednesday’s falls came despite the government announcing new measures to support the market, while Bloomberg News reported that the recent slump has led at least 1,249 companies to halt trading in the mainland, accounting for 43 percent of total listings.

Alex Wong, Hong Kong-based asset-management director at Ample Capital, added: “Gradually this will drag other markets lower because the magnitude of a China crisis would be far bigger than anything happening in Greece.”

‘Grexit scenario prepared’

In Hong Kong the Hang Seng China Enterprises Index–which tracks Chinese firms listed in the city–slumped 6.09 percent by the end.

“Chinese investors are selling the Hong Kong market to channel the money back to (mainland) A shares,” Louis Tse, a Hong Kong-based director at VC Brokerage, said.

“Investors anticipate more measures to support mainland shares. Realistically, it’s obvious that Hong Kong will lose out.”

US-listed Chinese stocks–including Alibaba and Baidu–took a hit as the shockwaves of the rout in Shanghai reverberated globally.

However, on Wall Street the Dow added 0.55 percent, the S&P 500 jumped 0.62 percent and the Nasdaq rose 0.11 percent.

On currency markets the dollar fell to 121.65 yen against 122.55 yen, with the Japanese unit considered a safe bet.

The euro fell to $1.1000 from $1.1007 in New York, although it is up slightly from a five-week low of $1.0916 it touched in US trade. The single currency was also at 134.00 yen against 134.89 yen.

In Europe, Greece moved closer to an exit from the eurozone after leaders ordered it to submit detailed bailout reform proposals by Thursday, while warning they had drawn up contingency plans in case it does not meet expectations.

All 28 European Union leaders will then examine the plans on Sunday in a make-or-break summit that could save Greece’s moribund economy, or leave it to its fate.

“Tonight I have to say loud and clear–the final deadline ends this week,” EU President Donald Tusk told a news conference.

“Inability to find an agreement may lead to bankruptcy of Greece and insolvency of its banking system,” he added.

European Commission President Jean-Claude Juncker warned “we have a Grexit scenario prepared in detail,” although he insisted he wanted Athens to stay.

The move turns the heat up on Greek Prime Minister Alexis Tsipras after the country voted Sunday against another round of painful austerity they say has crippled the economy.

On oil markets US benchmark West Texas Intermediate for August delivery dropped 46 cents to $51.87 a barrel and Brent tumbled 69 cents to $56.16.

Gold fetched $1,155.39 compared with $1,165.74 late Tuesday.

In other markets:

— Taipei shed 2.96 percent, or 274.05 points, to close at 8,976.11.

Largan Precision, a leading lens supplier to Apple’s iPhone and the domestic market, lost 4.93 percent to Tw$3,280 while Fubon Financial Holding shed 3.23 percent to Tw$60.0.

— Wellington eased 0.61 percent, or 35.47 points, to 5,767.70.

Air New Zealand was off 0.97 percent at NZ$2.54 and Fletcher Building slipped 1.38 percent to NZ$7.88.

— Manila shed 1.06 percent, or 79.22 points, to 7,363.43.

— Jakarta ended down 0.70 percent, or 34.48 points, at 4,871.57.

Construction firm Waskita Karya gained 3.20 percent to 1,775 rupiah, while palm oil firm Sawit Sumbermas Sarana dropped 6.33 percent to 1,850 rupiah.

— Singapore tumbled 1.67 percent, or 55.94 points, to close at 3,284.99.

DBS Bank fell 1.57 percent to Sg$20.65 and Singapore Airlines declined 1.51 percent to Sg$11.08.

— Kuala Lumpur fell 0.96 percent, or 16.47 points, to 1,695.83.

Budget air carrier AirAsia lost 12.8 percent to 1.30 ringgit, its lowest in five years, Telekom Malaysia dipped 1.04 percent to 6.63 ringgit while Top Glove added 2.16 percent to 7.10 ringgit.

— Mumbai fell 1.72 percent, or 483.97 points, to end at 27,687.72.

Mining major Vedanta Limited fell 7.85 percent to 146.10 rupees, while fast-moving consumer goods major Hindustan Unilever rose 0.04 percent to 924.00 rupees.

— Bangkok dropped 0.91 percent, or 13.52 points, to 1,470.25.

Bangkok Bank fell 1.43 percent to 172 baht while Airports of Thailand slid 1.30 percent to 303 baht.