Japan index drops more than 6%; China markets also see deep losses

HONG KONG (MarketWatch) — Asian stocks sank Thursday as uncertainty over U.S. monetary policy led to more declines on Wall Street. Japanese shares stood out with massive losses and a move back into bear-market territory as a further rally in the yen thrashed exporters.

The Nikkei Stock Average /quotes/zigman/5986735 JP:NIK -6.35% plummeted 6.4% to end at 12,445.38 in Tokyo for its sixth loss in seven trading days. The drop marked the benchmark’s decline for a seventh straight Thursday, including the 7.3% plunge on May 23.

The selloff came as the U.S. dollar /quotes/zigman/4868099/sampled USDJPY -1.40% fell as low as ¥93.76 during the session, nearly two full yen lower than the ¥95.61-level seen in North America late on Wednesday. The drop followed a third straight session of losses for U.S. stocks Wednesday, on concerns the Federal Reserve could taper down its bond purchases.

Asia stocks trade lower, with Japan selling off as the yen rises further.

The dollar’s tumble against the yen “will put regional markets under pressure, but it may also [force] the U.S. Fed to reconsider its tapering plans in the face of a global sell off,” said Kim Eng Securities director of sales trading Andrew Sullivan.

The Nikkei’s 6.4% drop put it 21.9% off from its intraday peak reached on May 23. A bear market is generally defined as a price decline of 20% or more over at least a two-month period, though the current fall has been in a much shorter time frame. The Nikkei briefly entered bear-market territory last Friday.

Elsewhere in the region, Singapore’s Straits Times Index lost 0.7% in afternoon trade. The index had dropped much further earlier in the day to enter a so-called correction territory — widely regarded as a 10% drop from a recent peak. Stocks in some other Southeast Asian markets suffered much bigger losses, with the Philippine stock benchmark ending 6.8% lower, while Thailand’s SET TH:SETIDX -1.32% slid 4.6% by late afternoon.

The losses Wednesday on Wall Street reinforced “the notion that the market is similar to a junkie who needs a constant fix, which in this case comes in the form of monetary stimulus,” said CMC Markets sales trader Miguel Audencial.

“Even a slight indication or the speculation that this stimulus will be scaled down may ignite a sell-off,” Audencial said.

Meanwhile, China’s Shanghai Composite /quotes/zigman/1859015 CN:SHCOMP -2.83% tumbled 2.8% as the markets reopened for the first time this week after a string of holidays, giving investors a chance to react to a string of downbeat economic data released over the weekend, including the monthly trade and inflation figures.

Hong Kong’s Hang Seng Index /quotes/zigman/2622475 HK:HSI -2.19% skidded 2.2%, and South Korea’s Kospi /quotes/zigman/1652118 KR:SEU -1.42% lost 1.4%.

Australia’s S&P/ASX 200 /quotes/zigman/1653884 AU:XJO -0.61% fell 0.6% to enter so-called correction territory — having dropped more than 10% from the highs reached in May. The benchmark declined despite official figures showing an unexpected improvement in employment trends during May.

Stock movers

In Japan, stocks found little respite as the U.S. dollar /quotes/zigman/4868099/sampled USDJPY -1.44% fell under the ¥94 level, raising more fears about the earnings outlook of companies with a significant international presence.

Global tumult grips markets

Global uncertainty is producing market volatility. Photo: Getty Images.

Shares of Fast Retailing Co. /quotes/zigman/139215 JP:9983 -8.64% /quotes/zigman/527410/quotes/nls/frcoy FRCOY -0.36% skidded 8.6%, Hino Motors Ltd. /quotes/zigman/193240 JP:7205 -9.87% /quotes/zigman/202872/quotes/nls/hinoy HINOY -1.14% slumped 9.9%, Hitachi Construction Machinery Co. /quotes/zigman/198746 JP:6305 -8.61% /quotes/zigman/529196/quotes/nls/htcmy HTCMY +1.94% plummeted 8.6% and Advantest Corp. /quotes/zigman/191696 JP:6857 -9.35% /quotes/zigman/1498444/quotes/nls/ate ATE +0.70% lost 9.4%.

“The combination of elevated risk aversion and disappointment over recent policy announcements, in particular the lack of detail about Prime Minister [Shinzo] Abe’s ‘third arrow,’ has prompted ever more upside for the [yen]” said Crédit Agricole forex strategy chief Mitul Kotecha.

Chinese property developers and banks suffered heavy losses during the session.

In Hong Kong, heavyweight stock China Construction Bank Corp. /quotes/zigman/35073 HK:939 -8.60% /quotes/zigman/529424/quotes/nls/cichy CICHY -1.08% lost 3.2% and China Overseas Land & Investment Ltd. /quotes/zigman/13931 HK:688 -3.53% /quotes/zigman/13933/quotes/nls/caovf CAOVF -0.35% skidded 3.5%; in Shanghai, Poly Real Estate Group Co. /quotes/zigman/1873491 CN:600048 -4.51% lost 4.5%, Citic Securities Co. /quotes/zigman/1868615 CN:600030 -6.35% /quotes/zigman/10341286/quotes/nls/ciihf CIIHF -2.71% plunged 6.4% and shares of CCB /quotes/zigman/1876229 CN:601939 -1.48% gave up 1.5%.

In Sydney, mining stocks came under pressure, with BHP Billiton Ltd. /quotes/zigman/270355/quotes/nls/bhp BHP +1.03% /quotes/zigman/180893 AU:BHP -2.58% lower by 2.6%, and Fortescue Metals Group Ltd. /quotes/zigman/329628 AU:FMG -3.35% /quotes/zigman/329626/quotes/nls/fsumf FSUMF -2.20% sliding 3.4%.

Rio Tinto Ltd. shares /quotes/zigman/176317 AU:RIO -2.39% /quotes/zigman/182541/quotes/nls/rio RIO +2.45% declined 2.4%. The company said it plans to sell its Eagle nickel and copper project to Lundin Mining Corp. /quotes/zigman/31370 CA:LUN -1.24%