Asia: Stock futures signal more pain as rand sinks to record low

[WELLINGTON] The outlook for Asian stocks looked grim, with New Zealand shares opening lower and index futures signaling losses following a continuation of the equity selloff in the US.

The Australian dollar extended declines after muted Chinese inflation data fueled speculation over the prospect of more economic stimulus, while South Africa's rand tumbled.

With Japan closed for a holiday, futures on indexes from Seoul to Sydney retreated in trading at the end of last week, as the Standard & Poor's 500 Index capped its worst week since 2011 amid the wild swings in China's market.

The yuan was steady in Hong Kong after sliding last week as China embarked on and then halted an eight-day run of reference-rate cuts. The Aussie fell a sixth day as the rand sank to a record low.

The new year has kicked off with a bang as a renewed bout of volatility in Chinese markets spurred a global bout of risk aversion, sending equities worldwide down the most in more than four years and hobbling commodities.

While data on Friday showed US payrolls surged in December, the focus will likely return to China Monday after the country posted a record 46th monthly decline in producer prices and inflation remained at about half the government's 2015 target.

US crude oil extended losses at a 12-year low last session as the gyrations in China added to already existing concerns over a global glut.

"Chinese equities have had a tough start to the year. This has flowed around the globe, kneecapping equities, where valuations were already deemed to be stretched," Mark Smith, a senior economist in Auckland at ANZ Bank New Zealand Ltd, said in a client note Monday.

"A weaker inflation outlook and heightened market volatility has also swung the pendulum back to more policy support - our Chinese economics team now expect a further 200 basis points of reserve-requirement cuts over 2016 to counter deflation threats."

STOCKS

New Zealand equities kicked off where the US left off, with the S&P/NZX 50 Index slipping 0.7 per cent as of 7.42 am. Tokyo time, falling for a fifth day.

Futures on Australia's S&P/ASX 200 Index signaled a 1.6 per cent slump, while contracts on the Kospi index in Seoul dropped 0.7 per cent in Friday trading. Technology, banking and mining stocks drove losses in Asia last week, with the MSCI Asia Pacific Index sinking 6 per cent, the most since September 2011.

In Hong Kong, futures also foreshadowed declines, with contracts on the Hang Seng and Hang Seng China Enterprises gauges falling at least 1.1 per cent in most recent trade. FTSE China A50 Index futures slipped 2.2 per cent, while those on China's CSI 300 Index dropped 0.6 per cent.

The largest US exchange-traded fund tracking Chinese shares retreated 13 per cent last week, exceeding the 9.9 per cent slide in the CSI 300.

China cut trading short on two days last week as selloffs in equities triggered a new circuit breaker, that was then abolished. The yuan's depreciation also fueled market anxiety.

The S&P 500 fell 1.1 per cent on Friday to bring its slump in the week to 6 per cent. An MSCI gauge of emerging-market equities slipped 6.8 per cent, also its worst weekly performance since 2011.

BLOOMBERG