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Asia: Stocks decline after global rout on China growth concerns

Thursday, January 7, 2016 - 08:37
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[TOKYO] Asian stocks fell for a fourth straight day after US equities deepened a global rout sparked by concern over China's economy.

The MSCI Asia Pacific Index fell 0.1 per cent to 126.87 as of 9:15 am in Tokyo. Turmoil has wiped more than US$2 trillion from the value of global shares in 2016, the worst start to a year since 2000. All eyes will be on the daily fix of the yuan's daily reference rate after the People's Bank of China signaled it's becoming more tolerant of a depreciating currency as the economy slows.

"The Chinese yuan is smack bang at the heart of concerns," said Chris Weston, chief markets strategist at IG Ltd. in Melbourne.

"This is key, and traders feel this portrays more yuan weakness to come and therefore additional strain on the global economy, not to mention corporate China. For risk assets to stabilise and sentiment to turn around, we are going to need a stable or even positive move in the Chinese currency."

China's increasing tolerance for a weaker yuan signaled authorities are struggling to shore up economic growth and rekindled concern last seen in August, when US stocks entered their first correction in four years. The World Bank cut its global growth forecasts for this year and next as China's slowdown prolongs a commodity slump and contractions endure in Brazil and Russia.

Japan's Topix index fell 0.1 per cent as the yen held at 118.62 per dollar, having gained 0.5 per cent Wednesday to the highest in more than two months. Australia's S&P/ASX 200 Index lost 0.1 per cent and New Zealand's S&P/NZX 50 Index declined 0.4 per cent. South Korea's Kospi index slipped 0.1 per cent.

With cash equity markets in China and Hong Kong yet to open, futures on the Hang Seng Index and contracts on the FTSE China A50 Index declined 0.8 per cent. China's stocks advanced Wednesday by the most in two weeks amid government efforts to shore up the volatile share market.

Futures on the Standard & Poor's 500 Index rose 0.2 per cent after the underlying index fell 1.3 per cent Wednesday to a three-month low and emerging-market shares dropped to the cheapest since 2009. Energy and raw-material companies led the selloff as Brent crude oil dropped below $35 a barrel to its lowest since 2004.

Minutes from the latest Fed policy meeting showed the committee decided unanimously three weeks ago to raise the benchmark federal funds rate by a quarter per centage point, ending an era of near-zero rates dating back to December 2008. The decision was a "close call" for some policy makers who worried about too-low inflation and received assurances that their colleagues would closely monitor its progress.

BLOOMBERG