Asian stocks close down on inflation, credit crisis fears


Posted at Jun 03 2008 07:31 PM | Updated as of Jun 04 2008 03:31 AM

Agence France-Presse

HONG KONG - Asian stocks fell sharply Tuesday due to fears that high inflation threatened economic growth and following a Wall Street tumble triggered by renewed concerns about the global financial crisis.

Japanese shares ended 1.6 percent lower as questions about the health of major US banks following huge losses caused by the default crisis among riskier -- or "subprime" -- mortgages once again came to the fore.

Those jitters had pushed Wall Street down more than one percent Monday and set a downbeat tone for Asia, where Taiwan and Australia both closed more than 1.5 percent lower Tuesday.

Elsewhere, Hong Kong ended 1.83 percent down, South Korea closed 1.5 percent lower and Singapore fell more than percent. Chinese and Indian shares were in the red too, while New Zealand closed down more than two percent and Manila ended 1.5 percent lower.

Investors were also grappling with the problem of rising prices in Asia due to surging food and fuel costs, with inflation running at its highest level for many years in a number of countries.

China said Tuesday runaway inflation, currently about 8.5 percent, remained the top risk for its economy, while Malaysian Prime Minister Abdullah Ahmad Badawi called for bold international steps to curb food and fuel prices.

Investors fear high inflation will hit consumer spending, squeeze business profits and lead to higher borrowing costs as central banks try to curb economic growth to calm prices.

Australia's central bank left interest rates unchanged Tuesday at a 12-year high of 7.25 percent but Prime Minister Kevin Rudd said high inflation was putting upward pressure on borrowing costs.

Economies such as Indonesia and Taiwan have raised petrol prices recently as traditional Asian energy subsidies and fuel price caps stretch national budgets due to high oil prices, which were around 127 dollars per barrel Tuesday.

Malaysia plans to unveil a revamped subsidy system on Wednesday.

The subprime mortgage default crisis has triggered a global credit crunch and, according to the IMF, could lead to losses of some one trillion dollars.

The US is battling to recover from the fallout and crumbling house prices, amid expectations of an American-led world economic slowdown.

TOKYO: Japanese share prices closed down 1.60 percent, hit by renewed concerns about the health of major US banks and by a stronger yen, which is bad for exporters, dealers said.

The benchmark Nikkei-225 index dropped 230.97 points to end at 14,209.17. The broader Topix index of all first-section shares fell 17.66 points or 1.24 percent to 1,407.44.

"Due to a lack of domestic catalysts, external factors can sway the market easily," Hiroaki Kuramochi, head of the equity department at Tokai-Tokyo Securities, told Dow Jones Newswires.

Automaker Honda Motor lost 3.3 percent to 3,490 yen and Toyota Motor shed 1.3 percent to 5,400 yen. Semiconductor firm Tokyo Electron fell 2.9 percent to 7,120 yen and electronics giant Sony gave up 2.9 percent to 5,360 yen.

HONG KONG: Hong Kong share prices closed 1.83 percent lower, dealers said.

The Hang Seng Index closed down 455.60 points at 24,375.76. Turnover was 83.86 billion Hong Kong dollars (10.75 billion US).

China Unicom suffered the largest drop, by 14.07 percent to 15.88 dollars, after the mobile-phone operator announced it would take over fixed-line operator China Netcom in a share swap valued at 56 billion US dollars.

Fixed-line operator China Netcom also fell sharply by 12.75 percent to 23.60. China Mobile fell 2.21 percent to 115.00.

The Chinese government and state press said last week that China planned to create three telecoms giants to bring balance back to an industry where mobile operators have prospered and fixed-line players lagged behind.

"Investors turn cautious in June," Ernie Hon, from ICEA Securities, told Dow Jones Newswires. "The US economic data to be released this week may cause a plunge, which will be a drag on the local market."

China Merchants Bank rose 1.1 percent to 28.25 dollars after it agreed to buy a majority stake in mid-sized Hong Kong lender Wing Lung Bank for 19.30 billion dollars. Wing Lung Bank jumped 3.6 percent to 152.70 dollars.

SYDNEY: Australian stocks closed 1.6 percent lower, dealers said.

The benchmark S&P/ASX200 fell 88.1 points to 5,574.2 while the broader All Ordinaries index shed 78.2 points to 5,703.0.

Turnover was 2.29 billion shares worth 6.3 billion dollars (6.0 billion US).

Macquarie Group shed 6.0 percent to close at 50.06 dollars.

"The banks came out with their results recently and they were pretty good, given the conditions in the last six months," Platypus Asset Management fund manager Simon Bonouvrie told Dow Jones Newswires.

Westpac dropped 3.9 percent to 21.79 dollars. St George, the country's fifth largest bank which has agreed to merge with Westpac, was down 5.7 percent at 30.14 dollars.

Miner BHP Billiton dropped 2.1 percent to 44.52 dollars while rival Rio Tinto fell 1.16 percent to close at 140.05 dollars.

SHANGHAI: Chinese share prices closed 0.65 percent lower, dealers said.

The benchmark Shanghai Composite Index, which covers A and B shares, closed down 22.65 points at 3,436.40 on turnover of 69.4 billion yuan (9.9 billion dollars).

Wireless telecom provider China Unicom's shares shed 1.54 percent at 9.59 yuan, off an intra-day high of 10.71.

It announced plans late Monday to take over fixed-line operator China Netcom in a share swap valued at 56 billion dollars. China is restructuring the telecoms industry.

"The retreat of China United Telecommunications' A shares triggered profit-taking in the broader telecoms sector, dragging down the major indexes," Ding Chaoyu at United Securities told Dow Jones Newswires.

Traders said there were hopes Beijing will not introduce new credit tightening measures.

"Investors widely expected (consumer price index) growth to slow down in May because of easing food prices, which means there will be no imminent tightening measures," said Wang Junqing, an analyst at Guosen Securities.

The Shanghai A-share Index shed 0.65 percent to 3,605.86. The Shenzhen A-share Index lost 0.49 percent at 1,086.01.

Telecom stocks retreated with ZTE Corp. falling 6.75 percent to 65.60 yuan. Huadian Power International tumbled 3.67 percent to 6.56 yuan. Air China rose 2.15 percent to 12.81 yuan.

The Shanghai B-share Index lost 0.73 percent to 243.03. The Shenzhen B-share Index was little changed at 544.78.

TAIPEI: Taiwan share prices closed 1.66 percent lower, dealers said.

The weighted index lost 145.04 points to close at 8,579.43. Turnover was 98.37 billion Taiwan dollars (3.24 billion US).

"Prospects for better Taiwan-China ties have encouraged foreign buyers, but most domestic ones have taken to the sidelines after a relatively substantial rise last month," said Tseng Yen-yu at Capital Securities.

China Steel was down 1.50 percent to 51.20. Cathay Financial retreated 2.48 percent to 78.60. Taiwan Semiconductor Manufacturing Co. was down 2.22 percent to 66.10 and United Microelectronics Corp. lost 2.91 percent to 18.35.

SEOUL: South Korean shares closed 1.5 percent lower, dealers said.

The KOSPI index finished down 28.14 points at 1,819.39. Volume was 253 million shares worth 4.7 trillion won (4.6 billion dollars).

Choi Sung-Rak, an analyst at SK Securities, said that "Asian markets today were pretty much under the influence of bad news from the US and the South Korean market in particular was hit by growing fears of inflation."

Samsung Electronics dropped 3.0 percent to 704,000 won and LG Electronics skidded 3.9 percent to 137,500 won. Hyundai Motor retreated 4.9 percent to 79,300 won and Kia Motors tumbled 4.7 percent to 11,250 won.

SINGAPORE: Singapore share prices closed 1.07 percent lower, dealers said.

The blue chip Straits Times Index (STI) fell 34.11 points to 3,153.94. Volume was 1.74 billion Singapore dollars (1.28 billion US).

AmFraser Securities' analyst Najeeb Jarhom said the further upside for the STI was limited with the resistance level seen at 3,200 points in the near-term.

The bank DBS was down 1.3 percent to 19.42 Singapore dollars. Neptune Orient Lines closed down 3.4 percent at 3.70. Yanlord Land was 2.3 percent lower at 2.17.

KUALA LUMPUR: Malaysian share prices closed down 0.4 percent, dealers said.

The Kuala Lumpur Composite Index fell 4.92 points to 1,257.57.

"The government is expected to announce a hike in fuel prices. The immediate impact on shares will be negative," a dealer told Dow Jones Newswires.

Malaysia is moving to cut the spiralling bill for its extensive petrol, diesel and gas subsidies, which is expected to cost 56 billion ringgit (17.37 billion dollars) this year.

Telekom dropped two sen to 3.18 ringgit. Maybank was steady at 7.40 ringgit. Tenaga dropped to 7.00 ringgit.

BANGKOK: Thai share prices closed 0.41 percent lower, dealers said.

The Stock Exchange of Thailand (SET) composite index dropped 3.36 points to close at 806.86, while the blue-chip SET 50 index fell 3.51 points to 576.82.

"The selling of more shares continued today, especially from foreign investors. Concerns over Thai politics remains a leading factor," said Pichai Lertsupongkit, senior vice president at Thanachart Securities.

Anti-government protests continued for tenth day on Tuesday, led by royalist activists in the so-called People's Alliance for Democracy.

The same group led mass street demonstrations against premier Thaksin Shinawatra in early 2006, before his overthrow in a coup later that year.

PTT Plc was unchanged at 322.00 baht. Bangkok Bank lost 4.00 to 124.00. Thai Airways International edged up 0.10 to 23.80.

JAKARTA: Indonesian shares closed 1.0 percent lower, dealers said.

The Jakarta Composite Index closed down 23.96 points at 2,403.81.

"I think the market may continue to consolidate tomorrow ahead of Bank Indonesia's expected interest rate hike the following day," a trader said.

Coal miner Indo Tambangraya closed down 5.5 percent at 33,750 rupiah and rival Bumi was down 2.6 percent at 7,550 on profit taking.

Bank Danamon dropped 2.7 percent at 5,350 on fears high interest rates could reduce margins.

MANILA: Philippine share prices closed 1.5 percent lower, dealers said.

The composite index lost 43.09 points to 2,782.80, while the all shares index gave up 20.91 points to 1,725.73.

"Signs the US economy continues to struggle and the absence of encouraging leads locally are keeping the market in consolidation mode," DBP Daiwa Securities research head Ron Rodrigo told Dow Jones Newswires.

Ayala Corp. fell 4.96 percent to 335 pesos while Ayala Land dropped 4.65 percent to 10.25 pesos on worries rising interest rates would hurt home sales.

Philippine Long Distance Telephone dipped 1.34 percent to 2,570.

WELLINGTON: New Zealand share prices closed down 2.32 percent, dealers said.

The NZX-50 gross index fell 84.17 points to 3,540.06.

"Asian markets started the week in a weak fashion," said Nigel Scott at ABN Amro Craigs.

Telecom fell 20 cents to 3.82 dollars and Fletcher Building fell 30 cents to 7.70. Contact Energy fell 33 cents to 9.15 dollars.

MUMBAI: Indian share prices closed 0.63 percent down, dealers said.

The benchmark Mumbai 30-share Sensex lost 100.62 points to 15,962.56.

"Appetite for Indian equities is weak, in a scenario of rising inflation, slowing economic growth and rising input costs for companies," said a dealer with broker Prabhudas Lilladher.