Asia Shares Drop as Brexit Uncertainty Persists

Japanese stocks tumbled Wednesday, leading stock markets across the region sharply lower as a fresh bout of anxiety over Brexit risks rattled investors.

Japan's Nikkei Stock Average sank 2.7% as the yen continued its strengthening trend. Elsewhere, Australia's S&P/ASX 200 fell 1.3%, South Korea's Kospi dropped 2.1% and Hong Kong's Hang Seng Index lost 2.0%. China's Shanghai Composite Index fell 0.2%.

The pound's slump to a 31-year low overnight and comments from the Bank of England renewed worries about prolonged uncertainty in Europe. BOE Governor Mark Carney said Tuesday the central bank wouldn't be able to completely mitigate economic pain, and that sent investors to the yen, the perceived haven in Asia.

Investors buy Japan's currency during times of market turmoil, but a strong currency chips away at the value of the repatriated income of Japanese exporters, so investors dump shares on expectations of lower earnings. The yen was recently trading at 100.75 to the U.S. dollar.

"The stronger yen is obviously hurting Japan, so Japan [stocks are] crumbling," said Andrew Clarke, director of trading at Hong Kong-based brokerage firm Mirabaud Asia.

Shares of Japanese banks and exporters were hit hard. Shinsei Bank was down 5%, Mitsubishi UFJ Financial Group sank 4.2%, and Nissan Motor lost 3.8%.

An overnight decline in Brent crude oil prices also pounded energy shares across the region. In Australia, Woodside Petroleum sank 1.9%, and Oil Search fell 2%. In Hong Kong, shares of Chinese state-owned firm Sinopec fell 3.1%, and Cnooc slumped 2.7%.

In China, stocks reversed Tuesday's gains as risk appetite dwindled. Developer China Vanke's Shenzhen-traded shares stemmed losses after falling by the 10% daily limit for two straight sessions. Its shares were last down 1.5%, after major shareholder Baoneng Group, which has been leading a hostile takeover attempt, said in an overnight exchange filing that it had increased its holdings in Vanke.

Chinese gold shares were among the day's few winners. Zhongjin Gold Corp. jumped 9.1%.

In other markets, investors continued their hunt for yield in longer-dated bonds. The yield on Japan's latest 20-year note hit an all-time low of minus-0.005% in Tokyo trading, touching negative territory for the first time.

The yield on Japan's 10-year government bond hovered at minus-0.269%, while the yield on Australia's 10-year bond fell to 1.861%, both historical lows. Bond yields fall as their prices rise.

"People are really looking everywhere and anywhere for potential yield," Mr. Clarke said.

Meanwhile, an anomaly emerged in the iron-ore market. Prices rose even though the supply of the metal increased. The spot value of iron ore is up more than 10% since the start of June, while the inventory of imported ore at China's ports is at an 18-month high.

Robb Stewart, Rhiannon Hoyle, Hiroyuki Kachi, Kosaku Narioka and Yifan Xie contributed to this article

Write to Dominique Fong at [e-mail]

(END) Dow Jones Newswires

July 06, 2016 00:45 ET (04:45 GMT)

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