Japanese stocks plunged into a bear market amid a slump in equities across Asia as investor concerns over the global economic outlook outweighed technical signs that a China-fueled rout has gone too far.
The Topix index sank 3.7 per cent to 1,338.97 at the close in Tokyo, taking its loss since a high on Aug. 10 to 21 per cent. The Nikkei 225 Stock Average fell 3.7 per cent to 16,416.19, also down 21 per cent from its recent peak on June 24. Concern over China's ability to manage a transition to more sustainable growth has driven down global equities in 2016. The International Monetary Fund cut its world expansion outlook.
"Everything is falling," said Tsutomu Yamada, a market analyst at Kabu.com Securities in Tokyo. "It's difficult for the market to rebound unless oil or something else truly hits bottom. Whether it's oil, the dollar-yen, US shares, Hong Kong or Shanghai shares - something has to rebound."
The Nikkei 225 last entered a bear market in June 2013, after plunging 20 per cent in less than a month. The gauge soon rebounded, rallying 31 per cent from its low on June 13, 2013, through the end of that year.
"We'll continue to see a tug-of-war between nervous sentiment and technical indicators showing that falls have gone too far," Chihiro Ohta, general manager of investment information at SMBC Nikko Securities in Tokyo, said by phone. "At the root of the selling we've seen this year has been the imbalance of oil supply and demand, so until the oil price moves calm down, the stock market will struggle."
Oversold Signs
The Topix's 14-day relative strength index fell to 24.35, below the level of 30 which some traders say indicates that shares will rise. When the measure slid to 24.4 on Jan. 12, the Topix jumped 2.9 per cent the next day.
Oil explorers led declines among the 33 Topix industry groups as crude continued to fall, with Inpex Corp. sinking 6.2 per cent to its lowest close since 2006. Athletic-wear maker Asics sank 7 per cent, the most in two months, after Haitong Securities cut its rating on the stock.
Exporters dropped as the yen strengthened 0.7 per cent to 116.80 per dollar, weakening the outlook for overseas earnings. Toyota Motor Corp. slumped 3.4 per cent to be the biggest drag on the Topix, while Sony lost 8 per cent to lead declines on the Nikkei 225.
Only two stocks gained on the Nikkei 225, while 48 dropped for each that fell on the broader Topix.
The MSCI All-Country World Index fell 3.3 per cent in New York, bringing its drop from a May record past the 20 per cent threshold for a bear market. More than $15 trillion has been erased from the value of global equities in the period, according to data compiled by Bloomberg.
West Texas Intermediate crude lost as much as 4 per cent to $27.32 a barrel before trading 3 per cent lower. Inventories probably increased by 2.75 million barrels last week, according to a Bloomberg survey before a report from the Energy Information Administration Thursday.
The global economy will expand 3.4 per cent this year, down from a projected 3.6 per cent in October, the IMF said in a quarterly update to its World Economic Outlook.
The yen strengthened 0.9 per cent to 116.58 per dollar, and touched 115.98, the strongest level since Jan. 16, 2015. Japan's currency appreciated 0.9 per cent to 127.19 per euro. The euro was little changed at $1.0897.
The Washington-based fund also cut its forecast for growth in 2017 to 3.6 per cent, down from 3.8 per cent three months ago.
Speculation is mounting that China may boost stimulus measures after a report on Tuesday showed gross domestic product in the world's second-largest economy expanded 6.9 per cent in 2015, just shy of the government's 7 per cent target, and the least since 1990.
