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TSE sees heavy losses on China woes

JIJI, Reuters

Weighed down by dismal Chinese manufacturing data, stocks kicked off 2016 with heavy losses on the Tokyo Stock Exchange on Monday, sending the benchmark Nikkei average to below 18,500 — a two-month low.

The 225-issue Nikkei average plunged 582.73 points, or 3.06 percent, to end at 18,450.98, the lowest closing since Oct. 22 last year. On Wednesday, the key market gauge rose 51.48 points. The Tokyo market was closed on Thursday and Friday for year-end and New Year holidays.

The Topix index of all first-section issues closed down 37.63 points, or 2.43 percent, at 1,509.67, after rising 3.91 points the previous trading day.

Tokyo stocks met with selling from the outset of the day’s trading after U.S. equities closed 2015 lower.

The market showed some resilience through midmorning trading, with undervalued stocks attracting purchases. But it came under heavy selling pressure after China’s manufacturing industry purchasing managers’ index for December showed a disappointing reading.

Meanwhile, Chinese stock markets tumbled 7 percent on Monday, their opening session for 2016, as weak factory activity surveys and falls in the yuan added to concerns about the struggling economy.

Early losses quickly snowballed in the afternoon, with trading suspended for the first time around 0530 GMT, about 90 minutes before the regular close.

Hong Kong’s Hang Seng Index was pulled down 3 percent in response.

In Tokyo, stocks accelerated their downswing toward the day’s closing in line with the yen’s strengthening against the dollar amid a growing risk-off mood, forcing the Nikkei average to give up more than 600 points in late afternoon trading. The market was also pressured by Chinese shares’ sell-off, brokers said.

“The day’s plunge was triggered by the late morning release of the Caixin China manufacturing PMI,” a private manufacturing activity gauge, said Chihiro Ota, general manager for investment research and investor services at SMBC Nikko Securities Inc.

The December PMI came to 48.2, dropping from 48.6 in the previous month and falling short of the consensus expectation of 49.0.

The economic indicator’s month-on-month setback had a larger impact on the market than its failure to meet the market expectation, as investors had anticipated a better reading, Ota added.

Worries about the course of the Chinese economy quickly spread throughout the market, pushing players to the sell side, brokers said.

The risk-averse sentiment was also enhanced by deterioration in the Middle Eastern situation, caused by Saudi Arabia’s decision to sever diplomatic ties with Iran following Iranian protesters’ attack against the Saudi Arabian Embassy in Tehran over Saudi Arabia’s execution of a prominent Shiite cleric.

Falling issues overwhelmed rising ones 1,712 to 170 in the TSE’s first section, while 53 issues were unchanged.

Volume grew to 1.9 billion shares, from Wednesday’s 1.4 billion shares.

Stocks related to “explosive” shopping by Chinese tourists were downbeat. Among them were department store chain Isetan Mitsukoshi, cosmetics-maker Shiseido and discount retail chain Don Quijote.

The higher yen battered exporters, including automakers Toyota, Honda and Fuji Heavy, industrial robot manufacturer Fanuc and electronics parts producers Alps and Murata Manufacturing.

Mega-banks Mitsubishi UFJ, Mizuho and Sumitomo Mitsui met with risk-averse selling.

Other major losers included mobile phone carriers SoftBank Group and KDDI, clothing store chain Fast Retailing, Japan Tobacco, confectionery-maker Meiji Holdings and airline ANA.

On the other hand, oil issues JX Holdings and Inpex gained ground on speculation that crude oil prices could rise on the back of the Saudi-Iran woes.

In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average dived 620 points to end at 18,380.

In China, selling intensified after a brief 15-minute trading halt early in the afternoon when main indexes had shed 5 percent, and activity in Shanghai and Shenzhen was halted for the day soon after.

The blue-chip CSI300 index ended down 7 percent at 3,470.41 points, while the Shanghai Composite Index lost 6.9 percent to 3,296.66.

As well as the China factory activity survey, investors also dumped stocks ahead of the imminent expiration of a share sales ban on listed companies’ major shareholders, which was imposed during the market crash last summer.

“The slump apparently triggered intensified selling, while the triggering of the circuit breaker seems to have heightened panic, as liquidity was suddenly gone and this is something no one has experienced before,” said Gu Yongtao, strategist at Cinda Securities. “It was a stampede.”