Asia: Stocks mostly lower as oil prices plunge

Asia stocks were mostly lower as oil prices headed further south and China’s central bank introduced measures to stem capital outflows.

Hong Kong’s Hang Seng index closed down 1.45% and Japan’s Nikkei 225 fell 1.11% while the Shanghai Composite rose 0.45%.

Oil prices took another tumble as sanctions on Iran were lifted, raising concerns that the oversupply in the market will worsen. At 0903 GMT, Brent crude fell 1.7% to $28.44 per barrel and West Texas Intermediate dropped 1.5% to $28.97 per barrel.

“The last thing the oil market needs now is more supply but with the lifting of sanctions from Iran that is what it’s going to get from the country with the fourth largest amount of proven oil reserves,” said Simon Smith, chief economist at FXPro Insights.

“The low oil price is proving to be a growing headache, for the traditional Middle East producers and their budgetary numbers, together with the newer shale producers (more initial investment) as well as central banks.”

Meanwhile, the People’s Bank of China said on Monday it will start implementing a reserve requirement ratio (RRR) on offshore banks' domestic deposits from 25 January to restrict speculation on further depreciation of the yuan.

The offshore Chinese yuan was last up 0.4%, after the PBoC guided its onshore counterpart stronger earlier on Monday.

Global financial markets have been volatile in recent weeks after the PBoC allowed the yuan to fall sharply before moving aggressively to try to steady the currency.

The central bank is reportedly planning to raise the RRR next week for yuan deposits placed in yuan clearing banks to the normal level.

In Japan, the yen weakened 2% to 117.24 against the dollar but remained near its strongest level in five months. A stronger yen hurts exporters as it makes goods more expensive to buyers from overseas.

The Hong Kong dollar fell to a new four-year low of 7.801 against the dollar. The decline came despite Hong Kong’s de-facto central bank saying that it remains committed to keeping the currency pegged to the US.

Looking ahead, Tuesday will see China’s gross domestic product figures for the fourth quarter. Analysts predict a 6.9% increase year-on-year, below the government’ 7% target. China retail sales and industrial production data are also due.