By Ese Erheriene
The Nikkei Stock Average on Monday closed at its worst levels of this young 2017 and Chinese stocks saw a last-hour slump which some considered akin to panic selling as Asian stocks continue to sag after start-of-year strength.
With a lack of significant data releases to anchor moves and U.S. markets to be closed later Monday for a holiday, the choppy trading conditions from last week prevailed. Increasingly skittish investors have displayed caution ahead of U.S. President-elect Donald Trump taking office Friday.
Markets are likely to “remain cautious ahead of the inauguration, as any concrete announcements are only likely to follow in the subsequent week,” said Mixo Das, southeast Asia equity strategist at Nomura.
Meanwhile, there’s fresh concerns about Brexit, and that sent the British pound down more than 1% as investors worry about the probability of a “hard-Brexit” scenario ahead of a key speech on Tuesday by U.K. Prime Minister Theresa May. Negotiations with the European Union are due to begin by the end of March.
While Japan stocks were the story for most of the day in hitting their worst levels of January amid outsized gains for the yen, Chinese action grabbed attention ahead of its close.
Just as the regular trading in Tokyo ended, Chinese stocks began slumping as their last hour of trading began. The benchmark Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP +1.27% was down 2.2% for the day at its worst level of the session -- hitting four-month lows -- and the growth-stock-heavy ChiNext /zigman2/quotes/210597994/delayed XX:SZX00065 +2.95% slumped as much as 6% before finishing off 0.3% and 3.6%, respectively.
“Today’s market slump brings back memories of the stock-market crash,” said Deng Wenyuan, an analyst at Soochow Securities.
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Leading the rebound in Shanghai were financial blue chips, and state funds were speculated to have stepped in.
“The inherent logic that has historically supported high valuations of the ChiNext board has been proved false,” added Wenyuan. Traders and investors say the increased pace of initial public offerings allows by the government in recent months has pressured valuations on the ChiNext.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +2.00% closed down 1%, and export stocks lagged amid the yen’s strength. Mitsubishi Motors /zigman2/quotes/202404490/delayed JP:7211 +5.81% fell 2.5% and Sharp /zigman2/quotes/203224600/delayed JP:6753 +2.50% slid 3.6%.
Elsewhere in the region, Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +1.51% ended off 0.6% while the Taiex in Taiwan and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.86% each fell 0.9%.
According to Andrew Sullivan, managing director of sales trading at Haitong International Securities, U.K. fund managers might offload some of their Hong Kong stocks to bring repatriate money. This thesis appeared to divide the Hong Kong market, with blue-chip British bank HSBC /zigman2/quotes/202687335/delayed HK:5 +3.16% down 1.1% while rival Standard Chartered /zigman2/quotes/202369078/delayed HK:2888 +3.01% rose 0.6%.
Bucking the regional trend, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +0.69% closed 0.5% higher, buoyed by strong gains in utilities stocks and higher commodity prices. Big gains in Chinese futures markets for iron ore and steel rebar in particular gave the index a shot in the arm.
Investors are taking cues from Beijing’s sustained efforts to reduce capacity, as a top official from the coal-mining hub of Shanxi province pledged to eliminate around 20 million tons of coal and 1.7 million tons of steel capacity.
China will continue moving markets this week, as market participants focus on the release of the country’s fourth-quarter GDP on Friday.
— Yifan Xie and Takashi Nakamichi contributed to this article.