Asia: Stocks decline as China enters bear market

Asia stocks declined on Friday as China entered a bear market and oil prices reversed the previous day’s gains.

The Shanghai Composite Index fell 3.5% at the close, falling more than 20% from its December high, amid concerns about the volatility in the yuan. The index was also weighed down by a report that some banks in Shanghai have suspended the acceptance of shares from smaller listed companies as collateral for loans.

“Interventions by Chinese authorities are beginning to wane and lack effect as the cycle of capital outflows, weaker yuan and general volatility undermines investor confidence globally,” said Brenda Kelly, head of analysts at London Capital Group.

Hong Kong’s Hang Seng index and Japan’s Nikkei 225 also finished lower, falling 1.50% and 0.54% respectively.

Meanwhile, oil prices slumped as concerns about the oversupply in the market persisted. Brent crude fell 2.2% to $30.19 per barrel and West Texas Intermediate dropped 3.5% to $30.12 per barrel at 0905 GMT.

In economic data, the People’s Bank of China revealed that Chinese banks issued 597.8bn yuan ($90.7 billion) of new yuan loans in December, down from 708.9bn yuan in November and below the 700 billion yuan that was forecast.

China’s central bank set the yuan at 6.5637 to the dollar, marking the sixth-straight session it has guided the currency roughly steady.

The yuan traded at 6.6162 to the dollar in the freely traded offshore market, up 0.3% from the previous day. Onshore, where the currency can trade up or down 2% from the PBoC’s daily fix, the yuan traded at 6.5866, broadly unchanged from the previous day.

The Japanese yen rose 0.2% at 117.85 to one US dollar. It has risen 2% year-to-date.