Tokyo stocks tumble 3.14% on China equity rout

Tokyo stocks tumbled 3.14 percent Wednesday as a rout in Chinese equities hammered sentiment and added to losses fuelled by worries over Greece's future in the eurozone.

The Nikkei 225 index at the Tokyo Stock Exchange dropped 638.95 points to close at 19,737.64, the first time it has fallen below the psychologically important 20,000 level in several weeks.

The broader Topix index of all first-section shares dived 3.34 percent, or 54.75 points, to 1,582.48.

Tokyo opened in the red on concerns about Greece as it faces another deadline to reach an agreement on its debt, and the losses piled up in the afternoon as the plunge in Chinese markets sent shivers across regional bourses.

Shanghai dropped nearly seven percent at the open despite government moves to shore up markets, which have plunged more than 30 percent since mid-June, and investors are now worried about the spill-over effect on the already slowing Chinese economy.

Bloomberg News reported that to prevent further losses, trading has been suspended in more than 1,200 mainland firms, representing 43 percent of those listed.

The losses also spread to Hong Kong, which sank almost five percent at one point in the morning, while US-listed Chinese firms tumbled despite a pick-up across Wall Street's three main indexes.

Japan is a major trading partner with China and many firms with links to the mainland saw their shares tumble from Tuesday's close.

Automaker Nissan, which is heavily dependent on sales in China, tumbled 6.55 percent to 1,191 yen, factory robotics maker Fanuc fell 4.52 percent to 23,930 yen, while construction and mining equipment giant Komatsu dropped 5.80 percent to finish at 2,231.5 yen.

Among the other decliners, Toyota shares sank 2.27 percent to 7,931 yen, bank Mitsubishi UFJ was down 4.51 percent to 840.5 yen and mobile carrier SoftBank fell 2.96 percent to 6,934 yen.

- Ripple effect -

"Today we're starting to see Japan being dragged down and people worry about how the Chinese economy would affect Japan," said Alex Wong, asset-management director at Hong Kong's Ample Capital.

"This will drag other markets lower because the magnitude of a China crisis would be far bigger than anything happening in Greece."

European leaders on Tuesday gave Athens until the weekend to come up with a debt reform plan or be ejected from the eurozone, sending traders scrambling into safer investments such as the yen.

In Asian currency markets, the dollar weakened to 121.87 yen from 122.55 yen in New York, while the euro was also lower at 134.11 yen against 134.89 yen.

Japan's currency is seen as a safe bet in times of turmoil or uncertainty.

"I think the pricing-in of the Greek debt problem is continuing, but we still have a lot of uncertainty," said Hiroichi Nishi, a manager at SMBC Nikko Securities in Tokyo.

"Continuing declines in Chinese stocks, or fears that the Chinese economy will keep slowing down, will weigh on the market."

Earlier Wednesday, Japan logged a current account surplus of 1.9 trillion yen in May, wider than economists' forecast of 1.57 trillion yen.

The current account is the broadest measure of Japan's trade with the rest of the world including both goods and services, tourism and returns on foreign investment.

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