Asia stock markets set to slide again on US, Europe sell-off

Asia stock markets set to slide again on US, Europe sell-off

Chinese markets retraced early losses Monday, with the Shanghai composite opening 1.84 per cent lower before retracing losses to trade flat.

The Shenzhen composite was up 0.85 per cent after opening down 2 per cent. The CSI300 was up 0.41 per cent.

On Friday, China saw a late spate of selling that pushed the Shanghai composite to finish 3.51 per cent lower for the session. The index has fallen some 20.52 per cent since its most recent high of 3,651.76 on December 22, and remains in a bear market, down 43.85 per cent from its 52-week high of 5,166.35 in June, 2015.

With China set to release its fourth quarter gross domestic product (GDP) numbers for 2015 on Tuesday, some analysts believe the sell-off in Chinese equities may worsen.

Vishnu Varathan from Mizuho Bank said in a morning note, "Tellingly, with China equities down 9 [per cent] last week and a devastating 18 - 22 [per cent] for the year, the risk is that fourth quarter GDP on [Tuesday] will be an asymmetric risk whereby 'half empty' tendencies could extend China, and wider EM/commodity, sell-off."

Varathan added if China misses its full-year growth guidance of 7 per cent, which is widely expected, it will be "an excuse to sell."

Apart from GDP, a slew of economic data are due including industrial production, fixed asset investment and retail sales.

Tim Condon from ING said in a separate note that given the risk and uncertainties surrounding China, "any downside miss poses significant risk to financial markets."

Before market open, the People's Bank of China (PBOC) fixed its dollar-yuan mid-point at 6.5590, signaling a stronger yuan compared with Friday's fix of 6.5637.

Major Asian indexes extend sell-off

Other major Asian markets traded lower Monday, extending losses on the back of another sell-off on Wall Street on Friday.

In Japan, the Nikkei 225 retraced some of its early losses to trade down 1.42 per cent after falling as much as 2.39 per cent earlier, hovering at a one-year low. South Korea's Kospi traded 0.37 per cent lower after slipping as much as 1.19 per cent at market open.

Down Under, the Australian market traded in the red, with the main ASX 200 index retracing some losses to trade down 0.80 per cent. Earlier, the index traded off as much as 1.80 per cent. Energy sector weighed heavily on the index, down 3.07 per cent.

In Singapore, shares opened lower on Monday, with the Straits Times Index (STI) down 1.4 per cent, The Business Times reported.

Oil extends losses in Asian trade

Major energy stocks in Australia continued to sell-off with Santos tumbling 7.32 per cent, Oil Search falling 4.90 per cent and Woodside Petroleum sliding 2.19 per cent.

Oil futures extended their fall during Asian trade. The West Texas Intermediate (WTI) was down 1.12 per cent at $29.10 a barrel, after declining 6.33 per cent last week. Globally traded Brent futures shed 1.31 per cent at $28.56 a barrel; it fell 8.27 per cent over last week.

Other energy plays across the region also saw red, with Japan's Inpex down 1.80 per cent and Japan Petroleum sliding 2.30 per cent. South Korean oil plays such as S-Oil, SK Innovation, and GS Holdings were down between 0.38 and 1.67 per cent.

In China, Hong Kong-listed shares of CNOOC, PetroChina, and Sinopec were down between 0.25 and 2.55 per cent.

Concerns about increased output in an already oversupplied oil market was heightened after sanctions on Iran were lifted at the weekend.

Iran's deputy oil minister said the country was ready to increase its crude oil exports by 500,000 barrels a day.

Resource producers take a hit

Resources and financial stocks in Australia traded mostly down. Shares of Rio Tinto and BHP Billiton, the country's two biggest miners, slid 2.56 and 3.25 per cent respectively. Iron ore producer Fortescue was down 2.61 per cent.

Among the country's so-called four biggest banks, ANZ performed the weakest, down 1.65 per cent. The rest of the banks also traded down.

Some gold stocks saw early gains with shares of Newcrest up 0.35 per cent. But Alacer Gold slid 4.44 per cent due to price target cuts for the miner from the likes of Morgan Stanley, Credit Suisse and Macquarie, according to reports.

The Australian dollar retraced losses to gain 0.23 per cent by mid-morning against the US dollar, fetching at $0.6878, after falling to its lowest since April 2009 in early morning trade.

Societe Generale (SocGen) said in a note Sunday that depreciation of commodity currencies mean, "production costs (a significant share is in local currencies) decline in dollar terms, further encouraging production [of commodities] and adding to the oversupply."

The note added, "Weaker currencies spread concerns to other sectors indebted in dollars. These concerns then spill over to broader markets, further weighing on confidence in the real economy."

The "concern is that the current configuration is leading to an investment drought that will trigger future shortages and price spikes," SocGen said.

In Australia, index heavyweights Woolsworth and Wesfarmers were up 4.85 and 2.72 per cent. Retail giant Woolsworth said it would exit the Masters Home Improvement and Home Timber & Hardware business by either shutting it down or selling it. It was considered unprofitable. Wesfarmers, on the other hand, announced last week it would expand its hardware business with the purchase of UK-based retailer Homebase.

Japanese, Korea heavyweights slide

Japanese stocks extended their sell-off with major export stocks slipping as the Japanese yen, considered a safe-haven currency, was in demand as risk aversion grows. The dollar-yen pair fell below the 117-mark to trade at 116.94. A stronger yen is usually considered negative for Japan's exporters as it trims earnings when translated back into the home currency.

Export-oriented stocks such as Toyota, Nissan, and Sharp slid between 2 and 4.8 per cent.

Index heavyweight Fast Retailing was down 2.51 per cent.

In South Korea, blue chip stocks were mostly down, with shares of Samsung Electronics shedding 2.56 per cent, Hyundai Motor sliding 1.44 per cent and Posco slipping 0.93 per cent.

Sell-off on Wall Street

On Friday, the Dow Jones industrial average closed down 390.97 points, or 2.39 per cent, at 15,988.08, losing 2.19 per cent for the week. The S&P 500 was down 41.55 points, or 2.16 per cent, at 1,880.29, falling 2.17 per cent for the week.

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