Asia: Regional markets plunge on Chinese securities sell-off

Asian stocks were on the red on Wednesday with China posting big losses as panicked investors headed for the exit.

The Shanghai Composite Index fell as much as 8% in the first few minutes of trading and ended down 5.91%, hitting fresh three-month lows. With regional confidence dented, Hong Kong's Hang Seng plunged 7.58% posting its worst daily drop since 2011.

The Chinese government's move to freeze new share offers and establish a market-stabilisation fund in an attempt to halt the sharp decline in the country's stock market has so far proved to be "fruitless", according to analysts.

Chinese stocks were hurt by a massive sell-off, with 1,287 companies or 45% of the market being frozen overnight as companies halt trading, wipping off $2.5trn.

Accendo Markets' Mike van Dulken and Augustin Eden said: "Mass trading halts will just worsen the panic when stocks eventually reopen as pent up demand to sell is released."

The yuan hit a four-month low against the dollar at RMB 6.2094.

In a fresh bid to halt the decline in stocks, China Securities Finance Corporation said it will increase purchases of small-cap stocks. Meanwhile, Chinese premier Li Keqiang on Tuesday failed to mention the stock market crises in a statement on the economy. The premier said on a government website that China has the ability to deal with economic risks, but did not mention the recent losses in Chinese shares.

Capital Economics analysts said inflation is expected to have risen in June and forecasts further increases in months ahead to "quash any lingering concerns over deflation".

"A rebound in both consumer and producer price inflation should further assuage fears about deflation in the economy. But we thought these were overdone in any case. The main drag on price pressures in China has been a fall in import prices, the impact of which is likely to be temporary," said Chang Liu, China economist, at the research firm.

In company news, Chinese conglomerate Fosun confirmed it has made an offer to acquire German private bank Hauck & Aufhäuser Privatbankiers KGaA (H&A) for €210m.

In Japan, the Nikkei 225 also closed down 3.13% to a seven-week low hurt by the selloff in China. In economic data, bank lending declined to 2.5% year-on-year in June from 2.6%, according to the Bank of Japan.

The current eco watchers survey released by the Cabinet Office fell below market expectations to 51 in June, from 53.3 one month before. Forecasts expected a reading of 53.2. The outlook also fell to 53.5 from 54.5.

On the forex front, a dollar was fetching ¥121.61 at 10:31 BST.

Automobile manufacturer Nissan Motor lost 6.55% after revealing an air bag made by Takata Corp installed in one of its cars had deployed abnormally.

Elsewhere in Australia, the ASX index fell 2% as the Australian dollar slumped to a six-year low at $0.7390.

Mining companies were hit by the market pandemonium in China, with nickel, aluminium and copper futures at three-year lows and iron ore falling below $50 for the first time since April to a six-year low.

As a result, Rio Tinto lost 0.84% despite news it has re-opened its Kitimat aluminium smelter in Canada following extensive modernisation, which the miner says will fundamentally transform its performance.

The company said the modernisation will increase production capacity by 48% and result in Kitimat becoming one of the lowest-cost smelters in the world.

Fortescue Metals also fell 6.16% and Santos was down 3.25% due to weaker crude oil prices.