24.06.2013 ASIA STOCKS down on Shanghai stocks plunge

Chinese stocks plummeted to lead Asian equities lower Monday amid concerns that Beijing may be reluctant to ease a liquidity crunch. Short-term interbank interest rates in Shanghai, which hit record highs on Thursday, further extended their drop from those levels but stayed above the 6% level Monday.

The Shanghai Composite  suffered its worst one-day percentage loss in nearly four years, plunging 5.3% to end at 1,963.24 — its first close below the psychologically-important 2,000-point level since December. 

The performance is its worst since a 6.7% drop in August 2009. The Shenzhen Composite Index dived 6.1% to 881.87.

The performance also led to heavy losses elsewhere in the region, with the Hang Seng Index  in Hong Kong sliding 2.2% in afternoon trade, all set for a fifth straight trading day of declines, while Australia’s S&P/ASX 200  slid 1.5%.

Small- and medium-sized Chinese lenders suffered the most. Shares of China Minsheng Banking Corp.   plunged by the day’s 10% limit, China Merchants Bank Co.   skidded 6.7% and Shanghai Pudong Development Bank Co.  slumped 9.2%.

In Shenzhen, Ping An Bank Co.  dropped by the 10% daily limit, and Bank of Ningbo Co.  shed 9.9%, while the Hong Kong-listed shares of China Minsheng  and China Merchants Bank  lost 7.9% and 4.4%, respectively.

Moreover, on Monday Goldman Sachs became the latest investment bank to downgrade its forecasts on China growth for this year and next, citing tighter financial conditions. In a note dated June 23, Goldman said it now expects real gross domestic product growth at 7.5% year-on-year in the second quarter of 2013, from 7.8% previously. It expects GDP growth of 7.4% and 7.7% for 2013 and 2014, respectively, from 7.8% and 8.4%, previously.

Elsewhere in the region, South Korea’s Kospi  and Japan’s Nikkei Stock Average  dropped 1.3% each.

Japanese stocks had risen sharply earlier in the day after yen extended its decline and the ruling party won a sweeping victory in Tokyo elections.

The ruling Liberal Democratic Party’s sweeping victory in the Tokyo metropolitan assembly elections, coming a month ahead of the key polls for the upper house of the parliament, also aided the advance.

A drop in shares of some retailers and exporters weighed the broader market. Seven & I Holdings Co.   fell 1.3%, Nissan Motor Co.   lost 3.4%, and Honda Motor Co. dropped 2.2%.

In Sydney, a number of miners’ shares dropped as a firming U.S. dollar  weakened the outlook for commodities. Newcrest Mining Ltd.   slumped 7.9% after gold futures skidded nearly $100 an ounce last week.

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