Asian share markets swept lower Monday (January 11) after Wall Street suffered its worst starting week in history and doubts over Beijing’s economic competence sent investors into the arms of the safe-haven yen and sovereign bonds.
The absence of Tokyo for a holiday only made liquidity even harder to come by, heightening volatility.
South Korean shares fell, led by concerns about China and caution ahead of earnings later this month.
The Korea Composite Stock Price Index (KOSPI) slid 0.6 percent to 1,906.56 points as of 0238 GMT. Decliners outnumbered advancers by 5-to-3.
In Hong Kong, the Hang Seng index dropped 2.5 percent to 19,952.63 points, while the Hong Kong China Enterprises Index lost 3.5 percent, to 8,539.73.
China’s major stock indexes opened down on Monday after weak December inflation data was released at the weekend.
The CSI300 index fell 1.7 percent to 3,303.12 points at 0128 GMT, while the Shanghai Composite Index lost 1.7 percent to 3,131.85 points.
Geoff Lewis, Market Strategist of Manulife Asset Management contributed the crash to heavy government intervention last year.
“Well I think the crash that we’ve seen in the mainland equity markets took everybody by surprise. But it was more or less a direct result of the heavy-handed intervention last summer, particularly the lock up of so many shares by institutional investors which some estimates put as high as 1.2 trillion renminbi. That’s approximately eight percent of free float market cap. Even if only a small percentage of those institutional investors would have sold at the end of last week, that would still have been a significant selling pressure. So that made it rational for retail investors to want to exit the market first. So a direct result of the very inappropriate market interventions we saw last summer,” Lewis said
“The Chinese economy is not particularly sensitive to gyrations in the stock market. When the A-share markets will stabilize is difficult to say. It surprised me that sentiment seemed to recover so strongly in the autumn. And again margin financing was increasing. And it looked like retail investors had recovered confidence in the market. That confidence proved to be very, very fragile as we saw ahead of the expiration of the ban on large international, uh large institutional retail selling,” he added.
In Shanghai, a 67-year-old investor surnamed Ou was unhappy with the recent stock market turmoil.
“Chinese (stock markets) mechanism are medium and small investors based, not like (overseas stock markets) mechanism. So policy should take the interests of the vast majority of investors into consideration, which are important to support the (markets),” he said.
Australian shares plunged to 2-1/2-year lows on Monday. The S&P/ASX 200 index crumbled 1.6 percent or 79.43 points to 4,911.4 by 01:05 GMT. The benchmark shed 5.7 percent last week, its largest such loss since 2011 and the worst opening week on record. (Reuters)
