China Commodities Slump Weighs on Asian Shares

By Kenan Machado Features Dow Jones Newswires

Slumping commodities prices in China sent stock markets there lower Friday, leading declines across the region as investors feared that the nation's crackdown on speculation and borrowing could hurt metals demand.

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The Shanghai Composite Index was last down 0.7%, with the Shenzhen Composite off 0.4%. Hong Kong's Hang Seng Index lost 0.7%, while the Hang Seng subindex that tracks Chinese shares fell 1%.

Markets in Japan and South Korea were closed for holidays.

Chinese commodity futures extended losses as speculators sold contracts amid tougher rules aimed at cooling an overheating market. The most actively traded iron-ore futures contract opened down 6.8% on the Dalian Commodity Exchange, after tumbling by the 8% daily limit on Thursday.

Meanwhile, steel-rebar futures traded in Shanghai opened down 2.9% and rubber was down 4.5%.

On Thursday, already weak investor sentiment got a fresh hit after six Chinese government agencies pledged to curb runaway local-government debt by increasing oversight of the projects they are pumping money into.

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"Financial market regulatory scrutiny certainly appears to be driving liquidation across a range of asset classes onshore," said Bill Bowler, a Chinese equities trader at Forsyth Barr in Asia.

There was also some anticipation that the efforts could continue to tighten bank credit and impede growth, he said.

Weaker commodities prices were also dragging down stocks in Australia, with the S&P/ASX 200 down 0.4%. Among the index heavyweights, BHP Billiton was off 2.2%, Fortescue fell 1.4% and Rio Tinto lost 2.1%.

A decline in Brent crude oil prices to under $50 a barrel in early Asian trading also sent energy stocks sharply lower.

Australian companies Santos and Woodside Petroleum were down around 2% each, with Hong Kong-listed shares of PetroChina down 2.4% and offshore oil producer Cnooc 1.7% lower.

Bucking the trend, shares of Macquarie were last up 3.6%, after net profit for the Australian banking group rose 7.5% in the last fiscal year, beating analysts' forecasts.

Still, analysts expect that fears of any hard landing in China driven by the deleveraging move may be short-lived.

Tim Condon, head of research for ING in Asia, said he expects the People's Bank of China to have learned from its June 2013 experience, when the introduction of measures to curb the growth of shadow banking caused the interbank market to seize up.

Yifan Xie contributed to this article.

Write to Kenan Machado at kenan.machado@wsj.com

(END) Dow Jones Newswires

May 04, 2017 23:45 ET (03:45 GMT)