On Friday, Asians shares dropped with Chinese equities on track for their worst day in two years, as fears of higher US interest rates shredded global investor confidence.
The sell-off in global stocks that briefly looked to have ended mid-week has come back, tipping markets from the U.S. to Asia into declines exceeding 10 percent from their January highs. China, where retail investors dominate, got hit particularly hard Friday.
Japan’s Topix benchmark closed down about 2%, having pared the worst of its losses. South Korea’s index fell almost 2% and Hong Kong’s slid about 3%. Onshore China gauges at one point exceeded 5% losses on the day. U.S. futures climbed, even as the U.S. government entered a partial shutdown, and Treasuries slipped.
Meanwhile, the dollar weakened against the euro and the pound, and strengthened against the yen. China set the yuan lower Friday after it weakened the most since 2015 yesterday.
The Shanghai Composite Index tumbled 6.0% to its lowest since May 2017, and the blue chip CSI300 index dived as 6.1%. Both indexes were on track for their largest single-day losses since February 2016.
Frank Benzimra, head of Asia equity strategy at Societe Generale in Hong Kong, said Chinese shares slid mostly because of the U.S. correction but he had some China-specific worries.
He said he now is neutral on China equities “due to two concerns: valuations on China-consumer related industries and execution risks on deleveraging (more specifically financial deleveraging)”.
“The correction phase in equities could last through February and possibly into March,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management in Tokyo.