Asian stocks fall after opening up as China concerns weigh

The index has fallen 20 per cent from its recent high, the definition of a bear market, reached on December 22. That squeeze has narrowed the gap with the onshore market, though on Friday the offshore yuan was trading a little weaker, and 0.4 percent below the onshore spot at 6.6140 per dollar.

Traders and analysts attributed the sharp selloff to a Chinese state-run media outlet’s report that some Chinese banks were no longer accepting stocks as collateral for loans.

Chinese banks traditionally front-load their lending in the first half of the year after being granted new loan quotas, and then extend proportionally less credit into the year-end. Hong Kong slipped 1.5% in the afternoon. “The news is very confusing”.

Hong Kong stocks also fell, led by property shares, as a tumble in the Hong Kong dollar raised fears of a possible increase in interest rates.

In Japan, the Nikkei ended the day down 0.5% as Bank of Japan governor Haruhiko Kuroda reiterated that the country’s price trend was improving steadily reflecting a moderate economic recovery, and that he had no plan to expand monetary stimulus now.

“New lending in December was slightly lower than expected due to remarkable lending cuts by non-bank financial institutions”, said HSBC chief China economist Qu Hongbin, referring to businesses including insurers, cashier’s check issuers, pawn shops and microloan organizations that lack full banking licenses.

The Shanghai Composite lost 3.5 per cent, while the CSI300 tumbled 3.2 per cent. That put the former on track for a 9 per cent loss for the week, and the latter for a decline of 7.2 per cent.

“The market entered a disaster mode at the start of the year and it’s still in that pattern now”, said Wu Kan, a fund manager at JK Life Insurance Co.in Shanghai.

Saudi Arabian shares, one of the worst performing market along with China so far this year, hit five-year lows on Thursday.

Sales at gas stations declined 1.1% largely on the price decline and auto sales fell 0.1% as sales in the final month of 2015 slower after best yearly sales in almost a decade.

“The session started off poorly with China, which set things off, leading to oil prices falling, then European markets and Wall Street dropping”. PetroChina Company Limited, China’s largest oil and gas producer and supplier, sank by 3.8 percent and closed at 7.34 yuan.

“As liquidity is thin in the market, this has exacerbated movement” in the Hong Kong dollar, said an HKMA spokeswoman. Gold lost $13.50 to $1,073.60 an ounce, silver fell 41 cents to $13.75 an ounce and copper rose 2 cents to $1.98 a pound.

“This suggests that China may be less inclined to import US dairy products, but the declining yuan should not hamper China’s appetite for dairy products from Europe and New Zealand”, she adds. The local currency has gained 2 per cent year-to-date, as turmoil in Chinese and global markets have sent investors to rush for safety.