Asian stocks fell on Wednesday, as data from China's services sector, closely following disappointing numbers about the country's manufacturing sector, pointed toward a continuing slowdown in the world’s second-largest economy, dampening investor sentiments across Asian markets.
China's Shanghai Composite index slumped 1.32 percent while Hong Kong’s Hang Seng fell 1.87 percent. In South Korea, the KOSPI declined 1.20 percent and Japan's Nikkei was down 0.37 percent, while India’s BSE Sensex was trading down 1.06 percent in mid-morning trade. In Australia, the S&P/ASX 200 tumbled 2.18 percent, trimming most of its gains made in the previous session after the country’s central bank left interest rates unchanged at record lows.
The caution in Asian markets -- MSCI's index of shares in the Asia-Pacific region, excluding Japan, fell 1.9 percent -- was also attributed to a crucial employment report on Friday, which will follow the upcoming Independence Day holiday in the U.S.
"There is little upside momentum in the market right now. There is little that foreign investors could be cheerful about," Lee Kyoung-soo, a market analyst at Shinyoung Securities, told Reuters.
Earlier on Wednesday, two separate surveys showed that China's service sector expanded at a slower pace in June.
China's official purchasing managers' index, or PMI, for its services sector dropped to 53.9 in June from May's 54.3, stoking concerns about a slowdown creeping up on the Chinese economy. A PMI reading above 50 indicates expansion, while a reading below 50 indicates contraction.
A separate survey -- by HSBC-Markit -- showed that China’s services sector index nudged up to 51.3 in June from May's 51.2, as growth in new orders slumped to a four-year low.
"The underlying growth momentum is likely to be softening for services sectors, along with the slowdown of manufacturing growth. With sluggish growth of new orders, employment growth is under pressure," said Qu Hongbin, HSBC's China chief economist.
The HSBC survey also found that a sub-index for new orders fell to 50.5 in June, the lowest since November 2008, while business confidence touched rock bottom levels with the index posting its lowest level in the survey's history.
“As Beijing’s VAT reforms are likely to take time to filter through, we expect slower growth in service sectors in the coming months.” Qu noted.
The services sector data came after two separate surveys released on Monday indicated that growth in the country’s manufacturing sector was also slowing down.
While Asian stocks languished, the dollar index rose to as high as 83.622 earlier on Wednesday, its highest level since late May, according o a Reuters report, even as the yen hit a one-month low against the dollar, which in turn, helped Japan's benchmark Nikkei to a five-week high on Wednesday, before falling again.