Asian stocks dragged lower by Chinese markets

Asian stocks fell on Friday, led by China’s stocks, which continued to plunge.

China’s biggest market, Shanghai was down 7.39%; nearly 20% off its recent peak.

Meanwhile the Shenzhen Composite Index fell by 7.87% at market close. Morningstar said while the index was one of the best performing markets in the world last year, investors have started to question the longevity of China’s central bank stimulus.

Analysts also sounded warnings that China’s market has reached unsustainable levels.

Morgan Stanley said in a note this was probably not a dip to buy in, and said it was concerned by increased equity supply, weak earnings growth, high valuations and very high market debt to free float capitalization.

Hong Kong’s Hang Seng Index fell 1.77%, which Accendo Markets said was due to mainland China’s weakness.

The outperformer, Japan's Nikkei fell only 0.31% thanks to solid jobs data, better than expected inflation and despite a strong yen.

London Capital Group said inflation is expected to fall, which can only mean cheaper yen on the market, which would attract investors back to Nikkei stocks.

Consumer spending in Japan rebounded with a 4.8% year-on-year increase in May making the first positive reading since March last year.

Australia's ASX fell by 1.49%, in what was described as a lacklustre week which saw only one day of substantial gains.

Morgan Stanley said lower commodity prices were to blame for the indices fall below its EU and US counterparts.

The Greek debt saga also weighed on the Australian market, and downward spiralling iron ore prices hit mining stocks hard.