Major Asian stock markets ended sharply lower Tuesday, with Chinese shares falling in Hong Kong and Shanghai amid ongoing worries about possible limits on bank lending.
China's Shanghai Composite and Hong Kong's Hang Seng Index each fell 2.4%, while Taiwan's Taiex slumped 3.5%. Other Asian markets also fell amid caution over proposed restrictions on U.S. banks, with Japan's Nikkei 225 Average down 1.8% and South Korea's Kospi losing 2%. Markets in Australia and India were closed for public holidays. Dow Jones Industrial Average futures were recently down 52 points in screen trade.
"The recently proposed restriction on U.S. banks has a symbolic meaning, as it indicates policy makers are about to change their easy monetary policy stance," said Lee Kyung-soo at Taurus Investment & Securities in South Korea. He said financial market participants fear a possible reduction in liquidity, adding he was advising investors to lock in profits on any rises, rather than buying stocks on weakness.
Chinese shares fell across sectors in Hong Kong.
Shares of ICBC lost 3.4%, Bank of China fell 3.4% and Aluminum Corp. of China gave up 5.3%, while Geely Automobile Holdings sank 6.2% in Hong Kong; in Shanghai, ICBC lost 0.8%, with Poly Real Estate Group Co. shedding 4.8% and Air China shrinking 5%.
Industrial & Commercial Bank of China ordered its branches in Beijing Friday not to issue any new loans for the rest of January, and China Citic Bank Corp. has suspended new lending in Shanghai since last week because its local operation has used up the monthly quota for new loans in the city, people familiar with the situation told Dow Jones Newswires.
The Bank of China's earlier-than-expected announcement of its fund-raising plans (40 billion yuan or $5.87 billion convertible bond, and up to 20% new share issuance) confirms the regulator's determination to slow loan growth," BNP Paribas said in a report. "We expect the rest of the banking sector to clarify its fund-raising plans soon."
The sharp drop in Taipei came amid worries policy tightening in Shanghai could lower demand for the island's exports, and also on concerns that the Taiwanese central bank itself may pursue monetary tightening sooner-than-expected in the wake of strong economic data. Official figures released Monday showed Taiwan's industrial output jumped by a record 47.3% in December from the year-earlier month. Shares of Chi Mei Optoelectronics slumped 5.9% and Cathay Real Estate Development sank 6.9%, while Chinatrust Financial Holding Co. gave up 4.2%.
Losses in Tokyo came after the country's central bank kept its policy rate unchanged. The decision gave investors "a go-ahead with selling more," said Yutaka Miura, senior technical analyst at Mizuho Securities.
The yen, which strengthened during the session, hurt shares of exporters, though the currency's gains reversed after ratings agency Standard & Poor's cut its outlook on Japan's long-term sovereign debt rating to negative from stable after the market's close.
Masanaga Kono, strategist at SG Asset Management in Tokyo, said the move was unlikely to hurt the share market too much for the time being. "The share market may fall to some extent, but if the yen depreciates in the currency market because of [the S&P action], that may offset the impact. May be we should look at the bonds market rather than the equity markets [for reaction]," he said.
Shares of Honda Motor Co. lost 2.7% and Hitachi shed 5.9%, while Sony Corp. sank 4.8% in Tokyo.
Despite major U.S. tech companies Apple and Texas Instruments posting better-than-expected earnings results Monday, many tech counters around the region lost ground.
In Seoul, Hynix Semiconductor plummeted 9.4% on growing concerns no bidder will emerge to buy a stake in the company by the Jan. 29 deadline for preliminary bid, said Suh Don-won at Hanwha Securities.
"There's also market speculation that Hynix's creditors may sell some of their stake to the market, if no bidder submits bids by deadline, spurring share overhang worries," Taurus Investment & Securities' Lee Kyung-soo said.
Hong Kong-listed Foxconn International Holdings dropped 8.7%, extending a six-session, 19.7% decline, after the company issued a warning it expects fiscal 2009 net profit to show a "significant decline" from 2008's net profit of $121 million.
KDDI, Japan's number two cable-television company by subscribers, dropped 8.6% after the company offered to buy a 38% stake in the country's number one player, Jupiter Telecom, from Liberty Global for $4 billion in a deal seen as expensive by analysts.
Among other markets, New Zealand's NZX 50 gained 0.6% and Philippine stocks ended 0.4% lower. Singapore's Straits Times Index lost 2.5% and Indonesian shares dropped 0.8%, while Thailand's SET Index fell 1.2%.
In foreign exchange markets, the U.S. dollar fell as low as 89.52 yen and the euro dropped as low as Y126.11 during the session, before recovering in the wake of S&P's lowered outlook. The dollar was at Y90.01 from Y90.24 in late New York trade Monday. The euro was at $1.4087 from $1.4162, and at Y126.79 from Y127.79.
Lead March Japanese government bond futures gained 0.30 to 139.38 points, before the S&P announcement, as Nikkei's decline encouraged investors to keep their funds in safe-haven assets. The benchmark 10-year cash JGB yield was down 1.5 basis points at 1.320%.
March Nymex crude oil futures were down 91 cents at $74.35 per barrel on Globex. Spot gold was at $1,093.20 per troy ounce, down $3.90 from the New York close.
(END) Dow Jones Newswires
January 26, 2010 06:33 ET (11:33 GMT)
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