Asia shares shaken as China stocks extend plunge

Asian shares retreated to two-year lows on Wednesday after Chinese stocks extended their plunge, continuing to stoke fears about the stability of China’s economy.

With Chinese stocks steepening their decline, spreadbetters forecast a lower open from Britain’s FTSE .FTSE, Germany’s DAX .GDAXI and France’s CAC .FCHI.

The Shanghai Composite Index .SSEC retreated 2.8 percent, extending Tuesday’s 6 percent slide, amid growing worries that the government could be scaling back its rescue efforts. [.SS]

“Market confidence was hit the most by signs that the ‘national team’ is starting to retreat,” Zhou Lin, analyst at Huatai Securities said, referring to government funds that bought stocks in early summer to halt a market rout.

China’s securities regulator said late last week that the market had normalized and the government would allow market forces to play a bigger role in determining stock prices.

Japan’s Nikkei .N225 fell 1.5 percent and South Korea’s Kospi .KS11 lost 1.3 percent.

“Investors care about these two things – China’s economy and the timing of a U.S. rate hike. These two concerns dominate their minds now,” said Masaru Hamasaki, head of market & investment information department at Amundi Japan.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slid to a two-year low and was last down 0.3 percent. Australian stocks bucked the trend and climbed 1.3 percent.

Reuters