Asia: Equities end week in the red as Chinese markets plunge

Asian equities ended the week on a downbeat note, dragged lower by a slump in Chinese markets.

The Shanghai Composite Index tumbled 5.48% to 3,436.30, recording its largest daily percentage loss since 18 August, although it remains 1.6% higher in the month to date so far and 14% higher than its August low.

Meanwhile, Hong Kong’s Hang Seng lost 1.87%, extending its weekly losses to 2.8%.

The decline in Chinese stocks came as Citic Securities, the country’s biggest stock broker, slumped 10% after agreeing to cooperate with China’s stock regulator in an investigation of the firm for alleged violation of security rules.

Sector peer Guosen Securities also dropped 10% after a company filing revealed it was under investigation for a similar offence.

“Regulators have stepped up probes into short-sellers to include some of China’s biggest brokerage houses,” said CMC Markets’ analyst Jasper Lawler.

“The reason for the probes is likely to help stabilise the market by clamping down on leveraged trading and short-selling.

“The short-term reaction however has been destabilisation as investors run scared.”

Elsewhere, Japan’s Nikkei Stock Average lost 0.30%, led lower by airline stocks, with a number of companies in the sector suffering downgrades from brokers.

The commodities sector was also on the back foot in Asia’s second largest economy, despite producers rallying on hopes of China intervening to prop up its domestic metals industry, which has kept metals prices off their lows.

The Nikkei flirted with the 20,000 threshold on Thursday with stocks boosted by a weakening yen, but analysts believe the case remains for more monetary easing to be implemented.

“While Japan’s Jobless data improved, inflation showed need for continued stimulus from the Bank of Japan,” said Michael Van Dulken, head of research at Accendo Markets.

Meanwhile Australia’s S&P/ASX 200 and South Korea’s Kospi were down 0.16% and 0.08% respectively.

On the currency front, the yen edged 0.02% higher against the dollar, while the Australian dollar slid 0.22% against its US counterpart.