HONG KONG (AFP) – Asian stock markets mostly rose Monday following a rally on Wall Street and a strong pick-up in oil prices, but Shanghai plunged almost eight per cent after regulators punished three major brokerages for rule violations.
The euro continued to struggle against the dollar and yen before this week’s European Central Bank (ECB) meeting that is expected to unveil a vast bond-buying scheme to kickstart the eurozone economy.
Tokyo rose 0.89 per cent, or 150.13 points to 17,014.29, Sydney gained 0.19 per cent, or 9.86 points, to 5,309.1 and Seoul closed 0.77 per cent higher, adding 14.49 points to 1,902.62.
However, Shanghai was hammered, diving 7.70 per cent, or 260.15 points, to close at 3,116.35 – its biggest fall since June 2008. Hong Kong fell 1.51 per cent, or 365.03 points, to end at 23,738.49.
Regional investors were given a positive lead from New York, where all three main indexes finished the week on a high thanks to a jump in oil prices.
The Dow rose 1.10 per cent, the S&P 500 added 1.34 per cent and the Nasdaq rallied 1.39 per cent.
Crude rallied after the International Energy Agency said there were signs “the tide will turn” in the market after prices tumbled towards six-year lows.
While it foresaw prices sliding in the short term, the Paris-based agency said it expected a potential rebalancing of the market in the second half of the year.
The comments sent US benchmark West Texas Intermediate (WTI) for February surging $2.44 Friday, while Brent for March jumped $2.50.
However, on Monday the two contracts retreated slightly. WTI eased 68 cents to $48.01 a barrel and Brent fell 53 cents to $49.64.
In Shanghai shares plunged after the China Securities Regulatory Commission (CSRC) on Friday suspended three brokerages from opening new margin trading accounts for three months after rule violations were found.
The news was a blow for Chinese stocks, which surged more than 50 per cent last year helped by an interest rate cut in November.
The market was also driven by ample liquidity and margin trading – investors borrowing funds to trade with only a small deposit.
The three brokerages – Citic Securities, Haitong Securities and Guotai Junan Securities – are among the country’s biggest.
“The CSRC’s punishment of the three brokerages for rule violations for margin trading business last Friday was a punch to the market,” BOC International analyst Shen Jun told AFP.
Eyes are now on the release Tuesday of Chinese economic growth data for 2014, with an AFP survey predicting expansion of 7.3 per cent, down from 7.7 per cent in 2013. This would be the slowest annual rate since 1990, a year after the Tiananmen Square crackdown.
On currency markets the euro fetched $1.1563 and 135.42 yen, against $1.1566 and 135.87 yen in New York Friday.
The single currency is facing selling pressure before the ECB meeting on Thursday. Analysts are forecasting it will see the introduction of massive sovereign bond purchases, known as quantitative easing.
The scheme essentially entails the bank printing euros to boost lending and fight off deflation. However with more cash in circulation demand for the single currency weakens.
On Friday the unit sank below $1.1500 for the first time since November 2003.
The dollar changed hands at 117.11 yen in the morning, compared with 117.46 yen in New York Friday.
Gold fetched $1,276.05 an ounce, against $1,257.60 late Friday.