Japanese stocks fell sharply on Wednesday morning as a massive selloff in China's stock markets raised fears of a damaging blow to the world's second-largest economy - a major export market for Japan.
Japanese stocks fell sharply on Wednesday morning as a massive selloff in China’s stock markets raised fears of a damaging blow to the world’s second-largest economy – a major export market for Japan.
Companies with high exposures to China underperformed, with construction equipment makers Komatsu Ltd and Hitachi Construction Machinery falling 3.4 percent and 2.2 percent, respectively.
Trading houses, whose businesses rely on demand for commodities, were also lower, with Mitsubishi Corp and Sumitomo Corp declining 2.5 percent and 4.0 percent, respectively.
The Nikkei share average extended their opening losses and fell 1.6 percent to 20,042.25 in midmorning trade after the Chinese markets plunged at the starting bell.
The Shanghai composite index dived 8 percent, triggering a rush to buy the safe haven yen.
“Investors want to unload stocks related to China right now,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, adding inbound tourism-related stocks were also being hit due to worries that there may be fewer Chinese tourists to Japan.
Don Quijote Holdings, a discount store operator which was benefiting from a rise in sales from Chinese tourists, dropped 3.6 percent. Department store Isetan Mitsukoshi Holdings tumbled 3.8 percent and cosmetics maker Shiseido Co shed 2.2 percent.
Investors also continued to fret about Greece, which launched a desperate bid to win fresh aid from sceptical creditors at an emergency euro zone summit billed as the last chance for Athens to cut a rescue deal.
“The majority of investors were optimistic that there would be no major repercussion to the global market from the Greece woes, but continuous falls in European shares are worrisome,” said Hikaru Sato, a senior technical analyst at Daiwa Securities.
German Chancellor Angela Merkel said there were only days left to secure a deal, while Greek officials denied suggestions that Athens had not put forward new proposals for the emergency summit, held two days after Greek voters rejected conditions for a new bailout in a referendum.
The broader Topix fell 1.8 percent to 1,607.18 and the JPX-Nikkei Index 400 dropped 1.9 percent to 14,514.62.