Sydney ended 1.2 percent lower, Seoul slipped 1.2 percent and Singapore was 2.0 percent off. Tokyo was closed for a public holiday.
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The Shanghai stock market stopped trading last Monday and Thursday when the Shanghai Stock Exchange Composite Index declined seven percent on those days. The Hang Seng China Enterprises Index tumbled 4%, while the Hang Seng Index fell below the 20,000 level for the first time since 2013.
The latest selling was linked to weakness in the yuan, as the government’s decision to let the Chinese currency weaken was seen as a bad sign for the health of China’s economy, the world’s second largest.
The regulator’s statement came on Friday after the benchmark Shanghai Composite Index suffered a 10 percent loss in a week, with market shutdowns on Monday and Thursday triggered by the circuit breaker mechanism, the China Daily reported.
“The market is back to normal”, Tian Weidong, analyst at Kaiyuan Securities told Reuters.
Later in January, official data on growth in the fourth quarter, as well as across 2015 as a whole, is also forecast to show that China’s economy expanded at its slowest pace for 25 years.
While the kiwi spiked higher when the yuan fixing was announced, it subsequently pared its gains “partly because global investors are pretty unsure whether China is intent on further weakening the yuan”, Nicolson said.
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The story isn’t about Chinese stock markets, it’s more about the Chinese economy as a whole.
“‘Pessimism is the dominant sentiment”, said William Wong, head of sales trading at Shenwan Hongyuan Group Co.in Hong Kong. The People’s Bank set the mid-point fix at 6.5626 against the dollar. “In this context, we expect yuan volatility to remain high while depreciation pressures are likely to remain strong”.
A series of cuts in the yuan currency’s value to a five-year low against the dollar added to the sense of nervousness as Beijing stood accused of bungling its handling of the markets.
Beijing is seeking to transition the country’s growth model away from reliance on exports and fixed-asset investment towards a consumer-driven economy, but the reform is proving bumpy.
That’s just strike one for China.
Commenting on last week’s carnage in global capital markets and moves by China to let its currency drift lower, Jim Reid at Deutsche Bank on Monday said: “The reality is that constant small devaluations are probably counter-productive as they achieve little economically and cause a negative feedback loop through market turmoil”.
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Earlier in the week, worries about China were fueled by weaker-than-expected December manufacturing activity.
