Chinese shares staged a sharp decline Wednesday despite successful debuts for two China-linked stocks, prompting investors elsewhere to dump some shares and currencies perceived as risky.
The benchmark Shanghai Composite Index ended down 5.0% at 3,266.43, having fallen as much as 7.7% earlier in the day on disappointing Chinese corporate profits and falling commodity prices. The loss erased most of the gains made over the previous five sessions, and marked the Shanghai index''s biggest percentage drop since Nov. 18, when it tumbled 6.3%. Daily volume hit a record 302.81 billion yuan ($44.3 billion).
As the drop in Shanghai become more pronounced in the afternoon, other Asian markets including Hong Kong and Mumbai fell, with the Hang Seng Index ending down 2.4%. The Sensex was 1.3% lower. U.S. stock futures turned lower, with the Dow Jones Industrial Average futures recently down 20 points in screen trade.
In currency trading, the Australian dollar fell sharply and the yen, viewed as a safe haven, rose against major currencies.
Earlier, Japan''s Nikkei ended up 0.3%, South Korea''s Kospi slipped 0.1%, Australia''s S&P/ASX 200 gave up 0.6% and Taiwan''s Taiex slid 0.8%. Singapore''s Straits Times Index was down 0.8%.
Francis Lun, general manager at Fulbright Securities, said the Chinese markets tumbled from "an unattainable level because of hot money, and there are fears the central government will act to cool the markets."
Chinese policy makers in recent weeks have flagged inflationary worries and possible asset bubbles since lending exploded. New yuan loans in the first half of the year totaled 7.4 trillion yuan ($1.08 trillion), equivalent to about half of the country''s gross domestic product in the period. The loan growth has spurred calls by economists for the central bank to fine-tune its policies. Still, the People''s Bank of China has signaled no reversal of its moderately loose monetary-policy stance, which is aimed at spurring growth in the world''s third-biggest economy.
"The (Shanghai) market does need to correct after five consecutive sessions of gains, and it will likely continue to fall in coming days," said Wu Dazhong at Shenyin Wanguo Securities. "I expect the market to resume its upward trend after corrections if the PBOC keeps its appropriately easy monetary policy."
Leading the declines in Shanghai, China Cosco Holdings tumbled 8.4%, while Jiangxi Copper lost 9% after saying it expects first-half net profit to drop between 57% and 64% from a year earlier. Both had hit their daily limit of a 10% decline. In Hong Kong, China Cosco fell 6.7% while Jiangxi lost 8.5%.
Nonetheless, China State Construction Engineering Corp. and cement maker BBMG both jumped on their debut.
In Shanghai, CSCEC shares ended at 6.53 yuan compared with the initial public offering price of 4.18 yuan - though the finish was toward the lower end of the stock''s trading range for the day. Earlier, the stock jumped as high as 7.96 yuan. The $7.3 billion IPO - the world''s biggest so far in 2009 - was heavily oversubscribed. Shares of BBMG ended at HK$9.97 in Hong Kong, also well above its IPO price of HK$6.38.
"I don''t think the IPOs will be affected by the day-to-day movement of the market, unless there is some big news," said Howard Gorges, vice chairman at South China Brokerages.
Most regional markets had started the day on a weak note, with sentiment damped after weaker-than-expected U.S. consumer confidence data, which weighed on crude-oil and commodity prices.
Commodity stocks fell around Asia, with BHP Billiton losing 1.6% and Rio Tinto down 2.4% in Sydney. In Tokyo, Inpex lost 1.7% and Japan Petroleum Exploration shed 1.9%.
Further weighing on energy share prices in Hong Kong was China''s announcement that it would cut prices for refinery products. China Petroleum & Chemical Corp., or Sinopec, fell 5% and PetroChina was 3.9% lower. On the mainland, PetroChina sank 6% and Sinopec shed 0.8%.
In Mumbai, losses were led by metals, infrastructure and consumer goods shares. Tata Steel fell 5.8%, Sterlite Industries gave up 5.5%, Reliance Infrastructure lost 3.8% and DLF was down 6.6%.
Indonesian shares ended down 0.5%, while Philippine shares were resilient, advancing 1.3%.
In currencies, the yen rose against the U.S. dollar in late trading as Chinese stocks sold off, but has since given up gains. The dollar was recently buying Y94.70 compared with Y94.55 in late New York trade. The euro was at Y133.97 from Y133.99 late New York and at $1.4147 from $1.4172. The Australian dollar was buying US$0.8201, down from US$0.8267.
Spot gold was at $936.00 per troy ounce, down $1.00 from the New York close, reversing early gains. September Nymex crude oil futures were down $1.62 at $65.61 a barrel on the Globex electronic platform.