Asia stock markets retreated for a third straight day Tuesday as more investors locked in profits on the year-end rally and prepared to close their books on one of the worst years in decades.
The South Korean won and other regional currencies slipped, surrendering some of their gains posted this month as foreign investors have gradually warmed up to investing in riskier assets as market volatility has subsided. Trading was limited, with Japanese financial markets closed for a national holiday and many market players away from their desks before Christmas and other year-end holidays.
Last week Federal Reserve and Bank of Japan slashed rates to virtually zero in the world's two largest economies and launched more asset-buying plans to ward off a deeper recession. The array of measures by major central banks have helped calm investors, revive some bank-to-bank lending in strained credit markets and sparked a minor stock rally into year-end.
The U.S. dollar was down slightly against the euro and other major currencies, with this year's rebound petering out after being fuelled by U.S. investor repatriations, the widespread asset deleveraging and rush to secure short-term dollar funding. Crude oil prices are trading below $40 a barrel on signs of weakening demand from the global slowdown.
Seoul shares tumbled 3 percent, led by auto companies and chipmaker Hynix Seminconductor as investors locked in recent gains on grim earnings outlooks, but SK Telecom and insurers shined on dividend expectations. Hynix Semiconductor came under heavy pressure after rival Powerchip in Taiwan said it had deepened its previous output cuts and applied for government assistance. The South Korean chipmaker declined 6.2 percent, trimming losses ahead of a shareholder announcement on fresh funding for the world's No. 2 memory chipmaker.
Australian stocks closed down 0.7 percent as investors sold global miners such as BHP Billiton after lower commodity prices stoked worries a deep global downturn will further dent demand for commodities. Thin trading volumes ahead of the year-end holidays exaggerated price movements, with bid-ask spreads nearly doubling in some trades. Banks were also among the top losers as fund managers said they remained nervous about buying financial stocks due to the ongoing credit crisis that started the global recession. Westpac Banking, Australia's second-largest bank, fell 3.1 percent. Commonwealth Bank of Australia, the country's third-biggest bank, was down 0.1 percent.
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Hong Kong shares shed 2.7 percent as low energy prices hit oil firms and China stocks slid after a modest rate cut from Beijing, but Shaw Brothers headed for a record single-day percentage gain on its impending privatisation. Entertainment conglomerate Shaw Brothers (Hong Kong) shot up 56 percent after movie mogul Run Run Shaw said he was privatising his listed unit at HK$13.35 per share. Shares in Asia's largest oil & gas producer PetroChina slumped 5.4 percent after oil prices stayed below $40 a barrel after sliding 6 percent overnight. China's oil demand shrank for the first time in three years in November and crude imports last month fell to the lowest level this year as the global economic downturn began to weigh on the world's fastest-growing major economy. Offshore oil producer CNOOC fell 4.6 percent.
Trading activity in Singapore's Straits Times Index was substantially reduced in lead-up to Christmas, with very low volumes. Reluctance to stay invested amid lack of incentives was evident in the STI's 1.2 percent pullback.
Chinese stocks slid 4.6 percent to a one-week low, led by financial and property shares after the central bank announced a rate cut that was much smaller than the market had been
anticipating. Both property and financial shares were weak, with China Vanke, the country's leading listed property developer, falling after dropping almost 5 percent on Monday.