Asia stocks start 2016 on weak note as Middle East weighs

The Shanghai Composite Index hit its peak June 12 and then fell 30 per cent. A panicked government slashed interest rates and bought shares to halt the slide.

The falls prompted wide-ranging intervention by Beijing to prop up share prices.

By the close of the China trading session today, China’s blue-chip stock index – the CSI 300 – fell by 7%.

The Shenzhen Composite Index, which tracks stocks on China’s second exchange, slumped 8.19 per cent, or 189.01 points, to 2,119.90 on turnover of 355.3 billion yuan.

Overnight markets were getting crushed on the first day of trading for United States investors.

STOCKS in London have plunged on the first day of trading in the new year, dragged lower by market turmoil in China. The South Korean market was not yet trading.

Major markets in Europe also dropped, with Germany’s DAX down more than 4 percent at one point in afternoon trading. If stocks continue to fall the next day, the result will just be more losses.

The drop came as a disappointment to investors, who were likely hoping that the volatility that characterized the Chinese markets in 2015 was behind them.

Axa Wealth head of investing Adrian Lowcock says the suspension of Chinese stock market trading is a reminder that the stock market can be volatile but the big factor to consider is how this affects global growth. “Fundamentals will see the market struggle”, he said.

In Hong Kong, the Hang Seng Index tumbled by 2.8 per cent in response. Stocks in Australia, Taiwan and Southeast Asia were also lower.

China’s factory activity contracted for the tenth straight month in December and at a sharper pace than in November, the Caixin Purchasing Managers’ Index (PMI), which measures industrial activity in private and small enterprises, released Monday, showed. Investor sentiment wavered between optimism that the economy was strong enough to handle higher borrowing costs and concern that China’s slowdown will hurt global growth.

The reading is the 10th month in a row below the 50-point level which demarcates contraction and expansion.

Rising tensions in the Middle East added to the gloom.

Riyadh gave Iranian diplomats two days to leave the kingdom, while the supreme leader in Tehran said Saudi Arabia would face “quick consequences” for the execution. “Oil markets will be concerned that this could be an incremental step in a deteriorating political situation that might ultimately threaten world oil supply”, Ric Spooner, chief analyst at CMC Markets, said in a commentary.

U.S. Crude futures were up 2.54 percent at $37.97, while the internationally traded Brent was up 2.9 percent at $38.36, getting a boost from increased geopolitical tension in the Middle East.

The cost of an ounce of the yellow metal rose US$3 an ounce at US$1,063.