China's benchmark index ended at a 15-month low on Thursday, with material stocks leading losses on lower industrial commodities while investors trimmed risky positions ahead of a week-long National Day holiday next week.
The Shanghai Composite Index closed down 1.1 percent at 2,365.3 points, its lowest since July 2 and is down more than 14 percent so far this quarter.
It could be flat to down going into the end of this week. What's the point of holding onto so much risk ahead of such a long holiday? No trader would want to do that in this environment, said Hong Hao, a global strategist with CICC.
Gold and copper stocks led losses, pointing to investor jitters over the economy ahead of the release of China's official September purchasing managers' index (PMI) data on Saturday .
The Shanghai Materials Index was the standout underperformer among sector indices, finishing down more than 3 percent, with Zijin Mining Group Co Ltd and Jiangxi Copper among the biggest losers.
Zijin, the largest gold miner in the mainland, slumped over 4 percent to its lowest in a year as gold prices extended losses on Thursday. It is down almost 12 percent since hitting a high on July 14 this year.
Jiangxi Copper lost almost 3 percent after copper prices collapsed in a wide-ranging decline in global commodities prices. It has lost more than 40 percent this year, pushing multiples to its lowest since the 2008 financial crisis.
It is currently trading at 10.8 times forward 12-month earnings, compared to a historical median of 19 times, according to Thomson Reuters Starmine data.
The benchmark index is still holding above a key technical level at 2,357, the 61.8 percent Fibonacci retracement of its rise from its October 2008 trough to its cyclical peak in April 2009.
Turnover of A-shares on the Shanghai bourse stayed lackluster, in keeping with this week's trend.
FRANTIC FRIDAY SEEN IN HONG KONG
Hong Kong markets were shut on Thursday after Typhoon Nesat triggered a No. 8 warning, closing financial markets, schools and most businesses in the city.
But trading could be volatile if they reopen on Friday, as Hang Seng Index futures expired on Thursday and with many investors looking to finish dressing up their portfolios at the end of the third quarter.
Mainland property stocks could come into renewed focus after the Chongqing mayor told Reuters on Thursday that a pilot programme to levy property taxes is helping to cool price rises in the country's largest municipality and will eventually be extended to the rest of the country.
Mainland property company bonds fell on Thursday, extending a recent slide on fears of a rapid cooldown in the real estate market and falling prices.
Hedge fund managers, finding it difficult to sell their investments in the bonds and credits of these companies earlier this month, resorted to shorting their stocks, triggering a fresh slide.
The Hang Seng Index is poised for its worst quarter since the 2008 financial crisis, down almost 20 percent to date. Steep losses this month alone have opened up at least three gaps on the charts, pointing to stiff resistance ahead.