ASIA MARKETS: Asia Stocks Swoon; Japan, China Markets Plunge

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Asian stocks swooned Thursday after uncertainty over U.S. monetary policy led to more declines on Wall Street, with Japanese stocks standing out with massive losses as a further rally in the yen thrashed exporters.

The Nikkei Stock Average plummeted 6.4% to end at 12,445.38 in Tokyo for its sixth loss in seven trading days. The drop marked the benchmark's decline for a seventh straight Thursday, including the 7.3% plunge on May 23.

The selloff came as the U.S. dollar (USDJPY) fell as low as Yen93.76 during the session, nearly two full yen lower than the Yen95.61-level seen in North America late on Wednesday. The drop followed a a third straight session of losses for U.S. stocks Wednesday, on concerns the Federal Reserve could taper down its bond purchases.

The dollar's tumble against the yen "will put regional markets under pressure, but it may also [force] the U.S. Fed to reconsider its tapering plans in the face of a global sell off," said Kim Eng Securities director of sales trading Andrew Sullivan.

The losses on Wall Street reinforced "the notion that the market is similar to a junkie who needs a constant fix, which in this case comes in the form of monetary stimulus," said CMC Markets sales trader Miguel Audencial.

"Even a slight indication or the speculation that this stimulus will be scaled down may ignite a sell-off," Audencial said.

Meanwhile, China's Shanghai Composite tumbled 3.1% as the markets reopened for the first time this week after a string of holidays, giving investors a chance to react to a string of downbeat economic data released over the weekend, including the monthly trade and inflation figures.

Hong Kong's Hang Seng Index skidded 2.7%, and South Korea's Kospi lost 1.4%.

Australia's S&P/ASX 200 fell 0.6% to enter so-called correction territory -- having dropped more than 10% from the highs reached in May. The benchmark dropped despite official data showing an unexpected improvement in employment data for May.

Elsewhere in the region, Singapore's Straits Times Index lost 1.5% to enter a so-called correction territory -- widely regarded as a 10% drop from a recent peak. Stocks in some other Southeast Asian markets suffered much bigger losses, with Thailand's SET and the Philippine stock benchmark both sliding more than 5.5%.

Stock movers

In Japan, stocks found little respite as the U.S. dollar (USDJPY) fell under the Yen94 level, raising more fears about the earnings outlook of companies with a significant international presence.

Shares of Fast Retailing Co. (FRCOY) skidded 8.6%, Mazda Motor Corp. (MZDAY) slumped 6.2%, and Sharp Corp. (SHCAY) lost 6.5%.

"The combination of elevated risk aversion and disappointment over recent policy announcements, in particular the lack of detail about Prime Minister [Shinzo] Abe's 'third arrow,' has prompted ever more upside for the [yen]" said Crédit Agricole forex strategy chief Mitul Kotecha.

Chinese property developers and banks suffered heavy losses during the session. In Hong Kong, heavyweight stock China Construction Bank Corp. (CICHY) lost 4.1% and China Overseas Land & Investment Ltd. (0688.HK) skidded 4%, while in Shanghai, Gemdale Corp. slid 3% and shares of CCB gave up 1.7%.

In Sydney, mining stocks came under pressure, with BHP Billiton Ltd. (BHP) lower by 2.6%, and Fortescue Metals Group Ltd. (FSUMY) sliding 3.4%.

Rio Tinto Ltd. shares (RIO) declined 2.4%. The company said it plans to sell its Eagle nickel and copper project to Lundin Mining Corp.

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