IPXHY Inpex Corp (PK)

By Chao Deng 

China shares fell sharply Tuesday afternoon, as oil prices sunk lower, pulling down energy shares across the region.

The Shanghai Composite Index was last down more than 4%, at 2815.65, on track for a fresh low since Dec. 2014.

The benchmark is now off roughly 45% since its June peak.

The Shenzhen Composite Index was down 5.2%. The Nasdaq-style ChiNext benchmark plunged 5.7%.

While most of the region started in the red, China shares notably deepened their losses around one hour before the 3 p.m. local market close.

Investors have been wary that the government may be stepping back from heavy intervention in the stock market, after state-owned funds had been tasked last summer with buying shares. Late last year, coordinated buying had often come in the afternoon hours, sending shares surging.

Meanwhile, in Hong Kong, the energy sector plunged 5.2%, dragging down the Hang Seng Index by 1.9%. The Hang Seng China Enterprises Index of Chinese firms trading in Hong Kong dropped 2.8% at 7948.28. That benchmark hit a closing low of 7835 last Thursday, and currently trades at its lowest levels since 2009.

The Nikkei Stock Average fell 2.4%, with Tokyo-listed oil developer Inpex Corp. down 4.3%,

South Korea's Kospi was down 1.2%. Markets in Australia and India are closed for holidays.

The same concerns that have haunted stocks this year remain: Oil prices are trading near multiyear lows, and investors are worried about a slowing China and plans by the U.S. Federal Reserve to raise interest rates. But increasingly, the oil market is driving the action.

"The volatility [in oil] is not helping restore confidence back in the market," said Robert Levine, head of Asian sales and trading at brokerage CLSA. "It's not easy to put on new bets."

Brent crude oil gave up gains earlier in Asia to trade down 3.2% at $29.53 a barrel. In the U.S., prices had fallen 5.7% on Monday to $30.34 a barrel.

Brent oil has now fallen more than 20% this year.

But oil's losses haven't helped airlines, which usually benefit from lower costs on oil. China South Airlines Co. Ltd. and Japan Airlines Co. Ltd. slipped a fraction on Tuesday, leaving them down 22% and 2% respectively year-to-date.

Worries about slower global growth are overshadowing the benefits of lower oil, explained Mr. Levine.

In Japan on Tuesday, shares were getting pressure from the Japanese yen, which strengthened by 0.2%, to Yen118 per U.S. dollar. Mitsubishi UFJ Financial Group Inc. fell 3.7%.

South Korean shares fell after data showed that the country's economy slowed sharply in the final quarter of 2015. Gross domestic product expanded at a seasonally adjusted 0.6% in the October-December period from the previous quarter, after a revised 1.3% gain in the third quarter.

The latest growth figure was exactly in line with the median forecast of a 0.6% expansion in the fourth quarter, according to a Wall Street Journal survey.

Gold, a haven, was up 0.7% at $1,112.60 a troy ounce early in Asia.

In the U.S., the Dow Jones Industrial Average dropped 1.3% overnight.

Kwanwoo Jun contributed to this article.

Write to Chao Deng at Chao.Deng@wsj.com

(END) Dow Jones Newswires

January 26, 2016 01:40 ET (06:40 GMT)

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