Asian Stocks Hit One-Year Low on Bearish Chinese Markets

Asian stocks hit a one-year low on Wednesday as investor sentiment already hurt by Turkey’s currency crisis weakens further on bearish Chinese markets.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.9 percent to $521.29, after falling more than 1 percent to its lowest since August 2017. The index climbed 0.4 percent on Tuesday when the Turkish lira recovered from its record low.

Japan’s Nikkei 225 declined 0.6 percent to ¥22,204.22, while South Korean markets were closed for a public holiday.

Chinese Shares Drop for the Fourth Day

Losses in the Chinese markets deepened on Wednesday, with technology stocks declining on regulators’ decision to freeze approval of game licenses in the world’s largest gaming market.

Hong Kong’s Hang Seng index stumbled further by 1.5 percent to HK$27,323.59, after marking its lowest in a year, as internet giant Tencent Holdings Ltd. extended losses by 3.3 percent to HK$336.20.

The mood of the company turned sour after Chinese regulators banned the sale of its blockbuster video game Monster Hunter: World on its distribution platform WeGame.

On the mainland, the Shanghai Composite index slid 2 percent to CN¥2,723.26, while the blue-chip CSI 300 index dropped 2.4 percent to CN¥3,291.98.

Signs of the world’s second-largest economy slowing down and the ongoing China-US trade dispute also contributed to the bearish mood of Chinese equities.

Concerns about China’s slowing economy were reinforced by this week’s data on investment and industrial output.
The country’s industrial production growth remained unchanged at 6 percent in July, while fixed asset investment rose to 5.5 percent from the same period of last year compared to a 6 percent increase in the January-June period, according to data published by the National Bureau of Statistics (NBS).

Global trade tensions meanwhile are barely showing signs of easing, with China now filing a complaint to the World Trade Organization (WTO) to help verify the legality of the US tariff and subsidy policies.

The country’s commerce ministry stated that a US decision to subsidize renewable energy companies and impose tariffs on imported goods has gravely hurt the global market and harmed China’s trade interests.

US President Donald Trump’s administration announced in January its plans to implement what it called safeguard tariffs over four years, with a 30 percent tariff in the first year reduced gradually to 15 percent in year four.

Analyst Linues Yip said investors tend to focus on negative aspects of listed companies’ first half reports, as there is much pessimism and caution in a falling market.

Turkey’s Financial Crisis Continues

The Turkish lira retreated some of its gains on Wednesday after recovering more than 8 percent in the previous session.

The currency, which stunned global markets with a record low of 7.24 at the start of the week, was 3.5 percent lower at 6.1246 to the US dollar.

Head of Australian economics David Plank stated that the lira’s rebound on Tuesday provided European banks and other emerging markets some relief, but the saga is not over.

The primary cause of Turkey’s problems — a significant external deficit denominated in foreign currency – remains unaddressed by authorities, according to Plank.

He added that investors will remain cautious of possible contagion to the European banking system and will monitor other countries with high levels of foreign-currency debt.

The lira’s recent sharp decline came as a result of escalated US-Turkey tensions over the detention of an American pastor in Turkey, although the country’s economic issues also put the currency under pressure.

While the lira stayed above record lows, tensions between the US and Turkey kept the currency on an unstable position.

Turkey on Wednesday escalated its clash with the US, announcing higher tariffs on some American products including cars, alcohol and tobacco.

The measures were in response to the deliberate attack of the US administration on their economy, according to Turkish Vice President Fuat Oktay.

Tariffs on American cars and alcoholic beverages have now been doubled to 120 percent and 140 percent respectively.

Worsening relations between the US and Turkey as well as concerns about Turkish President Tayyip Erdogan’s growing control over monetary policy and the economy have seen the lira lost more than 40 percent this year.

President Erdogan on Tuesday called for Turkey to produce enough for themselves, urging his people to boycott American electronics products.

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