ASIA MARKETS: Chinese Stocks Fall Sharply, Hit By Regulatory Concerns

Shenzhen and ChiNext benchmarks dive nearly 3%

More new regulations and investors' preference for larger-cap companies whacked Chinese stocks, while activity was muted elsewhere in Asia. Thursday is a holiday in Japan and the U.S.

The Shenzhen Composite closed down 2.9% and the startup-heavy ChiNext gauge slid 2.8% as Beijing took steps to halt the proliferation of small online lenders, days after saying it plans to streamline oversight of asset-management products sold by financial institutions. The Shanghai Composite Index finished 2.3% lower.

Weak starts -- often attributed at least in part to regulatory concerns -- followed by quick recoveries has become something of a habit in Chinese markets of late. But Thursday's action was marked by not just a poor open, but also an ugly finish.

Some investors are rotating away from smaller-cap companies, which dominate the Shenzhen stock market, into large caps, more prevalent in Shanghai, said Caroline Yu Maurer, head of greater China equities at BNP Paribas Asset Management. "People are willing to pay for quality," she added.

The Shenzhen Composite, home to manufacturing and tech companies, has dropped into negative territory for 2017, a sharp contrast to the double-digit gains and multiyear or record highs achieved by many Asia markets.

On Thursday, selling in some so-called white-horse stocks--local jargon for blue chips--also weighed on sentiment, said David Millhouse, head of China research at Forsyth Barr Asia.

They have been under pressure for the past week, since the state-run Xinhua News Agency expressed concern about Kweichow Moutai (600519.SH) , which frenzied investors had turned into the world's most valuable liquor company. Shares in the maker of the traditional Chinese spirit baijiu fell nearly 3%, putting its week-to-date skid at about 8%.

Meanwhile, Hong Kong's Hang Seng finished down 1%, ending back under 30,000 just a day after closing above that mark for the first time in a decade.

Shane Chanel, an equities and derivatives adviser at ASR Wealth Advisers, said he is on watch for profit-taking after the recent gains in many Asian stock markets. He cautioned that markets could take a hit if U.S. tax-overhaul efforts are derailed.

"Any hiccups to the implementation of Trump's tax reforms...will mean the Grinch will be visiting us this Christmas," he said.

In Australia, the S&P/ASX 200 was essentially flat, as higher commodity stocks helped cushion weakness in banking stocks. The former got a boost from the U.S. dollar's worst session in eight months on Wednesday, which lifted commodities prices.

Oil futures were down modestly in Asian trading after the U.S. benchmark hit a 2 1/2 -year high on Wednesday.

Korea's Kospi was little changed even as tourist-related stocks like Lotte Tour and Amorepacific erased this week's declines. Investors there continue to assess the impact of fresh sanctions against North Korea. The Kospi finished down 0.1%.

The Japanese stock market closed Thursday for Thanksgiving, as will U.S. markets.

If the yen holds on to its overnight gains, Tokyo stocks are likely to slip when trading resumes Friday, as a stronger yen hurts Japan's export-oriented companies. The yen hit a two-month high against the dollar , which was recently around Yen111.24, versus Yen112.20 when Japan equities trading ended Wednesday.

(END) Dow Jones Newswires

November 23, 2017 05:43 ET (10:43 GMT)