Japanese shares suffered their worst losses in more than two years on Thursday after data showing an unexpected contraction in Chinese manufacturing activity added to worries the Federal Reserve could downscale its bond purchases.
The Nikkei 225 collapsed 1.143.28 points, or 7.2%, to 14,483.98.
The drop is the Nikkei’s worst single-day loss since March 15, 2011, when the market was overwhelmed by selling in the wake of a calamitous earthquake and tsunami. The benchmark’s closing level was nearly 1,460 points from the day’s peak.
The Nikkei is still up nearly 40% in 2013 to date, thanks to a massive rally seen earlier in the year as the yen’s weakness aided an improvement in corporate earnings and profit outlook.
In Hong Kong, the Hang Seng Index capsized 591.40 points, or 2.5%, to 22,669.68
Thursday’s slump came after a surge in Japanese government bond yields, which forced the Bank of Japan to offer two trillion yen ($19 billion U.S.) in funds to calm investor nerves. The central bank announced the fund-supplying operation after 10-year JGB yields soared to their highest level in more than a year, citing "the unreasonable increase" in volatility.
The massive reversal for Tokyo stocks ensued in the afternoon trading session, after preliminary results of HSBC’s China manufacturing Purchasing Managers’ Index for May dropped to a seven-month low of 49.6.
Singapore’s index lost heavily in afternoon trading, even though the local economy unexpectedly expanded 1.8% on an annualized basis in the first quarter from the preceding three months.
In Tokyo, most exporters retreated as the U.S. dollar plunged as low as ¥101.41 amid the choppy moves in Japanese stock and bond markets, compared with the day’s high at ¥103.56.
Swinging into losses after rising more than 5% at one point, Fast Retailing Co. ended the day 8% lower, while Sharp Corp. plunged 13.1%.
Financials suffered heavily as well, with Sumitomo Mitsui Trust Holdings Inc. losing 10.6%, Mitsubishi UFJ Financial Group Inc. diving 9.3% and Mizuho Financial Group Inc. shedding 6.3%.
Japanese life insurers, which had jumped earlier on hopes for improved earnings in the fiscal year ended March 31, also reversed course.
Dai-ichi Life Insurance Co. lost 6.6%, and T&D Holdings Inc. gave up 5.5%.
Asian resource stocks, which already under pressure in the wake of U.S. Fed Chair Ben Bernanke’s comments, took a further hit after the Chinese data.
Iron-ore producer Fortescue Metals Group Ltd. shed 2.8%, and gold miner Newcrest Mining Ltd. skidded 2.2% in Sydney, while Korea Zinc Co. dropped 3% in Seoul.
In Hong Kong, Cnooc Ltd. ended down 2.5%, and Jiangxi Copper Co. skidded 2.6%.
Financial stocks also suffered significant losses. Commonwealth Bank of Australia shed 2.8% in Sydney, and KB Financial Group Inc. declined 1.3% in Seoul.
CHINA
The China PMI reading added to fears about growth momentum in the world’s second-largest economy. The reading was below the 50-point threshold that separates improvement from deterioration in factory conditions, also lower than the expected result of 50.4.
In Shanghai, the CSI 300 Index shed 35.18 points, or 1.3%, to 2,582.85
Shares of China Construction Bank Corp. lost 2.3%, and Bank of Communications Co. fell 2.7% in Hong Kong; in Shanghai, they dropped 1.2% and 1.3%, respectively.
In other markets;
Singapore’s Straits Times Index staggered 61.20 points, or 1.8%, to 3,393.17
In Korea, the Kospi Index dumped 24.64 points, or 1.2%, to 1,969.19
Taiwan’s Taiex Index lost 161.01 points, or 1.9%, to 8,237.83
The New Zealand Exchange 50 Gross Index subtracted 21.59 points, or 0.5%, to 4,588.59
Australia’s S&P/ASX skidded 102.92 points, or 2%, to 5,062.45
