Asia stock markets fell Wednesday, paring strong gains from the previous session as hopes for strong stimulus spending in China faltered, and as more trouble in Spain posed fresh threats to the euro zone.
South Korea’s Kospi KR:SEU -0.98 percent dropped 1 percent, while Japan’s Nikkei Stock Average JP:100000018 -0.90 percent and Australia’s S&P/ASX 200 index AU:XJO -0.74 percent each lost 0.9 percent.
In China, Hong Kong’s Hang Seng Index HK:HSI -1.94 percent slumped 1.9 percent, and the Shanghai Composite CN:000001 -0.10 percent shed 0.2 percent.
Optimism about Chinese stimulus measures to power the economy took a hit after a state media report suggested the package will be relatively mild compared to actions taken at the height of the global financial crisis four years ago. Read more on the extent of likely Chinese stimulus measures.
Financials were sharply lower in Hong Kong, as Bank of Communications Co. HK:3328 -2.14 percent BKFCF -14.38 percent CN:601328 -0.63 percent gave up 2 percent, Haitong Securities HK:6837 -2.39 percent fell 2.4 percent, and China Life Insurance Co. HK:2628 -1.93 percent LFC +4.63 percent traded 2.3 percent lower.
Strategists at Barclays Capital said that while fresh easing measures could provide short-term upside for Chinese banking stocks, “resorting to investment stimulus and rates cuts are contrary to what China needs in the long run, namely economic rebalancing to consumption-driven…. deleveraging of the economy.”
Hong Kong-listed property firms also suffered, with Sino Land Co. HK:83 -1.65 percent SNLAY +2.38 percent and Agile Property Holdings Ltd HK:3383 +0.33 percent each lower by 2 percent.
However, mainland Chinese property shares moved in the other direction, with Gemdale Corp. CN:600383 +1.43 percent jumping 2.7 percent in Shanghai, and China Vanke Co. CN:200002 +1.53 percent up 1.6 percent in Shenzhen.
Chinese stimulus concerns added to existing offshore worries weighing on sentiment in Asia.
More credit rating downgrades for Spain and a Financial Times report that the European Central Bank rejected the nation’s bank-recapitalisation plans highlighted distress in the euro zone and pressured the euro. Read report on ECB’s rejection of Spain’s Bankia plans.
Weakness for the euro weighed on some leading exporters in Tokyo, as Sony Corp. JP:6758 -2.71 percent SNE +1.88 percent traded down 2.5 percent, Toshiba Corp. TOSYY +2.02 percent JP:6502 -2.98 percent lost 2.3 percent, and Sharp Corp. JP:6753 -3.79 percent SHCAF -3.92 percent slumped 4 percent.
Technology firms were also weak in Seoul, where Samsung Electronics Co. SSNGY 0.00 percent dropped 1.8 percent and LG Electronics Inc. LGEIY 0.00 percent surrendered 1.7 percent.
On the upside, stock in Olympus Corp. JP:7733 +4.20 percent OCPNY +4.65 percent jumped 4.9 percent following an Asahi Shimbun report that the firm is in talks to form a capital alliance with Panasonic Corp. JP:6752 -3.55 percent PC +3.39 percent or Sony to help shore up its balance sheet. Panasonic shares tumbled 3.4 percent. Read more on reported Olympus tie-up plans.
Renesas Electronics Corp. JP:6723 +31.37 percent RNECY -22.16 percent remained in focus – and shares soared 28 percent – after Dow Jones Newswires cited the company as saying reports of a major restructuring were “sensational” in nature.
Stock in resource firms dragged across the region as commodity prices eased overnight.
Citic Pacific Ltd HK:267 -1.84 percent CTPCF -5.48 percent slumped 3.2 percent in Hong Kong, while in Sydney, diversified miner BHP Billiton Ltd AU:BHP -0.80 percent BHP +3.58 percent lost 1.2 percent, and rival Rio Tinto Ltd AU:RIO -1.19 percent RIO +4.35 percent gave up 1.5 percent.
Australian gold producer Newcrest Mining Ltd AU:NCM -3.86 percent NCMGY +3.45 percent slumped 4 percent after a sharp drop in gold futures in New York overnight.
Energy firms also came under selling pressure after crude-oil futures edged lower in New York.
Tokyo-listed JX Holdings Inc. JP:5020 -2.22 percent declined 2.5 percent and Inpex Corp. JP:1605 -1.08 percent IPXHY +3.48 percent lost 1.5 percent, while Hong Kong-traded shares of Cnooc Ltd HK:883 -3.94 percent CEO +2.83 percent dropped 2.2 percent, and Sydney-listed Santos Ltd AU:STO -2.19 percent SSLTY +5.22 percent gave up 2.5 percent
Also in Australia, shares of Wesfarmers Ltd AU:WES -1.00 percent WFAFY +1.14 percent fell 1 percent as investors reacted to a sales and strategy update from the conglomerate, which cited a challenging market environment for its Officeworks chain. -By Virginia Harrison