Asian markets fell on Thursday with Tokyo plunging more than seven per cent as investors took profits after weak Chinese data and signs the US Federal Reserve could start tapering off its massive stimulus measures.
Tokyo dropped on record volumes in the afternoon as investors panicked in the rush to take profit, with the index suffering its biggest daily fall since the March 2011 earthquake-tsunami and the ensuing nuclear crisis.
Markets also took their lead from Wall Street, where stocks fell after Federal Reserve chief Ben Bernanke told Congress the Fed could scale back stimulus measures soon if economic conditions improved.
Tokyo closed down 7.32 per cent, or 1,143.28 points, at 14,483.98.
Sydney slumped 1.99 per cent, or 106.9 points, to close at 5,062.40. South Korean shares slid 1.24 per cent, or 24.64 points, to finish at 1,969.19.
Shanghai ended down 1.16 per cent, or 26.73 points, at 2,275.67, and Hong Kong dropped 2.54 per cent, or 591.4 points to finish at 22,669.68.
Tokyo plummeted after HSBC said manufacturing activity in China contracted in May for the first time in seven months, in another sign of the weakness of recovery in the world’s second-largest economy.
The British banking giant’s preliminary purchasing managers’ index (PMI) fell to 49.6 from a final 50.4 in April, putting it below the 50 mark that indicates contraction.
“The negative Chinese indicator triggered today’s selling,” said Hirokazu Fujikiki, strategist with Okasan Securities in Japan. “It was no wonder sizable selling could emerge as Japanese shares rose quite fast recently.”
Earlier in the day, the Nikkei 225 index at the Tokyo Stock Exchange, which closed at its best level in more than five years on Wednesday, had risen 0.23 per cent.
Other markets had opened down, taking their lead from Wall Street where the Dow Jones Industrial Average dropped 0.52 per cent to 15,307.17 after Bernanke’s comments.
He stressed that current economic conditions did not warrant an end to the Fed’s aggressive stimulus measures, and US stocks had rallied during the early part of his highly anticipated testimony.
But Bernanke told lawmakers the Fed could start reducing its US$85 billion-a-month bond-buying programme at one of the next few meetings. And stocks took a decisive lurch with the release of Federal Reserve meeting minutes that showed some officials had discussed curtailing bond purchases as soon as June.
“Fed Chairman Bernanke’s remarks caused jitters among global investors,” said Peng Yunliang at Shanghai Securities.
Europe’s main stock markets also slumped at the start of trading, with Frankfurt and Paris down more than 2.0 percent and London slumping 1.42 percent.
Selling in Japan picked up pace when the yen jumped against the dollar in Asia afternoon trade, as investors adjusted positions after the recent sharp decline in the value of the Japanese currency.
The dollar plunged to 101.63 yen in Tokyo afternoon trade from 103.31 yen in New York late Wednesday.
“The market may be entering an adjustment period after a sharp decline in the yen and a surge in Japanese stocks,” said Daisuke Karakama, a market economist at the forex division of Mizuho Corporate Bank.
Prime Minister Shinzo Abe’s pro-spending, pro-growth policies have weakened the yen more than 20 percent against the dollar over the past six months and boosted share prices to their highest level in more than five years.
The euro was at 130.62 yen from 132.58 yen and US$1.2875 from US$1.2855.
Oil extended losses in Asian trade, with New York’s main contract, light sweet crude for delivery in July, dropping 63 cents to $93.65 a barrel in the afternoon. Brent North Sea crude for July delivery shed 60 US cents to US$102.00.