Asia: Equity markets slump as concerns over China slowdown intensify

Asian equity markets closed in the red on Tuesday, as concerns over a slowdown in China spread to emerging markets.

The Shanghai Composite Index fell 2.02%, while Hong Kong’s Hang Seng reopened from a bank holiday but slumped 2.97%.

Chinese stocks were among the few to avoid a decline on Monday, when more disappointing data from the world’s second-largest economy dampened spirits in the region, with concerns compounded by the prospect of a rise in US interest rates by the end of the year.

A first interest rate hike in almost a decade would bring an era of cheap borrowing to an end, with emerging markets expected to bear the full force of the Federal Reserve’s decision.

“It still remains far from clear how weak or otherwise economic conditions in China are, but the weakness of the manufacturing sector, remains a real concern,” said Michael Hewson, chief market analyst at CMC Markets.

“We will get further insight later this week, with the latest Caixin manufacturing and services PMI, numbers for September, alongside the official number on Thursday.

Having taken a battering in Britain on Monday, mining and energy stocks slumped in China on Tuesday, with Glencore’s Hong Kong-listed shares plunging 29.3%.

Meanwhile, three of China’s major oil producers, PetroChina, China Petroleum and Chemical and Cnooc, tumbled 2.02%, 2.28% and 7.69% respectively.

The slowdown in the Chinese economy was being felt in Japan, where steelmaker Kobe Steel plunged 11.1% after cutting its profit outlook on the back of slower demand in China.

The Nikkei Stock Average closed down 4.05% and turned negative for the year, although there was slightly more positive news on the data front, as small business confidence in the country edged from 48.8 in August to 49.0 this month.

The yen advanced slightly against the dollar, gaining 0.07%.

Elsewhere, Australia’s S&P ASX/200 fell 3.82%, while South Korea’s Kospi was closed for a bank holiday.

Meanwhile, the Indian Central Bank chose to slash its key interest rate by 0.50 percentage points to 6.75%, with the weakness in commodity prices being cited, together with the need to stimulate domestic demand against the weakening global backdrop.

“The fact that yet another major economy is easing when the Fed are talking about hiking underlines why emerging markets are in turmoil, and why the market finds it so hard to believe the Fed,” analysts at Rabobank said in a note.

On the currencies front, the Indonesian rupiah and the Malaysian ringgit both reached new 17-year lows against the US dollar, while the greenback also gained 0.21% against its Australian counterpart.