World Economy

China Shares Plunge Most in Five Years

China Shares Plunge Most in Five YearsChina Shares Plunge Most in Five Years

Asian stocks fell, with the regional benchmark falling the most in a week, as China shares tumbled the most since 2009 amid record turnover and the yen climbed.

China Galaxy Securities Co. plunged 13 percent in Hong Kong, the biggest loss since the mainland brokerage listed in November 2013, to lead the MSCI Asia Pacific Index (MXAP) lower. Cnooc Ltd., China’s largest offshore energy explorer, dropped 4.4 percent as oil extended declines. Panasonic Corp., an electronics company that gets half its sales abroad, lost 3.2 percent in Tokyo.

The MSCI Asia Pacific Index sank 0.6 percent to 139.19 in Hong Kong, heading for the biggest loss since Dec. 1. The Shanghai Composite Index tumbled 5.4 percent, the most since August 2009, on government action to curb risky debt after topping 3,000 for the first time since 2011.

China’s policy change “is the biggest drag on the market as there’s a liquidity crunch,” said Zhang Gang, a strategist at China Central Securities Co. in Shanghai. “Investors have been overly speculative and this irrational surge has resulted in a bigger slump, too.”

The Shanghai Composite Index swung by more than 250 points as investors assessed the sustainability of the world-beating equity rally. Hong Kong’s Hang Seng Index lost 2.3 percent and a measure of mainland shares listed in the city plunged 4.6 percent.

  Risky Debt

China said lower-rated bonds can no longer be used as collateral for some short-term loans, sparking a selloff in debt and the yuan. The move will help remove riskier debt from the repo market before China requires local government financing vehicles to clarify next month which bonds are backed by the state, according to Guotai Junan Securities Co.

Japan’s Topix (TPX) index decreased 0.7 percent as the yen gained 0.9 to 119.65 per dollar today after rising the most since October on Tuesday. South Korea’s Kospi index slipped 0.4 percent. Australia’s S&P/ASX 200 Index sank 1.7 percent, while New Zealand’s NZX 50 Index added 0.3 percent. Singapore’s Straits Times Index climbed 0.5 percent.

Futures on the Standard & Poor’s 500 Index slid 0.3 percent. The equity measure dropped 0.7 percent Tuesday, the most since Oct. 22, retreating from a record high as energy shares led declines.

Energy companies also slumped in Asia as Brent and West Texas Intermediate extended five-year lows as Iraq followed Saudi Arabia in cutting prices for crude sales to Asia, adding to signs that OPEC’s biggest members are defending market share.