China-style volatility spread to Japan stocks Thursday, with the Nikkei Stock Average reversing sharp gains from the previous day, as the U.S. Federal Reserve wavers on a September rate increase.
In Japan, the Nikkei 225 index jettisoned 470.89 points, or 2.5%, to 18,299.62, after a 7.7% jump Wednesday, which was its biggest daily gain in nearly seven years.
In Hong Kong, the Hang Seng Index faded 568.81 points, or 2.6%, to 21,562.50
Asian share markets have struggled to rebound from last month’s lows. While the Chinese market is up since late August, the Nikkei, now near its lowest levels since February, is turning increasingly volatile.
The declines Thursday extend a series of swings over the past week, with two uncertainties prevailing in markets: China’s ability to shore up its market and the U.S. Federal Reserve’s timing on raising interest rates.
On Thursday, Japan shares returned to losses, despite encouraging comments from Bank of Japan Governor Haruhiko Kuroda that the government would continue with its current easing program until inflation stabilized at 2%. He said that inflation may not reach that level until around autumn next year, depending on oil prices.
The Nikkei surged yesterday as a rally in China and bullish comments from Japanese Prime Minister Shinzo Abe triggered a squeeze on short positions.
Elsewhere, shares in New Zealand were flat after the Reserve Bank of New Zealand cut its key interest rate Thursday as expected and left the door open to further easing.
The Australian dollar rose back above $0.70 U.S. after news of better-than-expected employment data for August. Total employment grew by 17,400, compared with an expected increase of 8,000 for the month.
CHINA
The CSI 300 in Shanghai dropped 41.74 points, or 1.2%, to 3,357.56
Chinese shares came off their morning lows, after official data showed China’s consumer inflation accelerating in August, rising 2% from a year earlier, compared with a 1.6% rise in July. Economists had expected a 1.9% gain.
The key takeaway for investors was that the rise wouldn’t prevent China’s central bank from further monetary easing, a positive for markets.
Analysts added that concerns about a government crackdown on illegal margin loans were pushing down brokerage stocks, taking down benchmark indexes with them.
Late Wednesday, China Minzu Securities revealed it was under investigation for improper accounting of two billion yuan of trading. Authorities have been investigating illegal margin loans at brokerages since July, with efforts picking up this month.
The stock regulator on Sept. 2 fined three tech firms for providing a platform for illegal loans for share trading, and analysts say it has given brokerages until the end of the month to clear nearly all illegal margin loans. As investors exit these margin loans, they may be forced to sell high volumes of China shares.
Thursday, Western Securities Co. Ltd. fell 6.6% and Guosen Securities Co. Ltd. was down 4.4%.
In other markets
In Korea, the Kospi index gained 27.91 points, or 1.4%, to 1,962.11
In Singapore, the Straits Times Index fell 40.15 points, or 1.4%, to 2,888.03
In Taiwan, the Taiex index slumped 18.24 points, or 0.2%, to 8,268.68
The NZX 50 inched back 0.44 points, or 0.1%, to 5,670.99
The ASX 200 Index slipped 126.11 points, or 2.4%, to 5,096.02
