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Lingering Doubts on Economy Weigh on Asian Markets

CNBC.com
Monday, 16 Feb 2009 | 5:44 AM ET

Asian stocks were under modest pressure Monday, with dismal economic data and doubts about prospects for the financial industry outstripping investor relief that a U.S. economic stimulus bill had finally passed.

The British pound fell, particularly against the yen , after the Group of Seven rich nations meeting over the weekend passed without public mention of sterling's sharp weakness or the yen's persistent strength. The U.S. dollar slipped against the yen after little comment was made about currencies at the G7 meeting. Crude oil prices surged 10 percent on Friday on hopes the U.S. fiscal stimulus package would boost demand. Futures are currently trading above $37 a barrel in the Asian session.

The yen remained firm despite a report showing Japan's economy shrank by the most since 1974 in the fourth quarter of 2008 compared with the previous three months, weighing on the Nikkei share index. The global economy fell off a cliff at the end of last year, further confirmed after a report last week showed a record contraction in the euro zone economy.

U.S. President Barack Obama will sign a $787 billion economic stimulus package of tax cuts and infrastructure investment on Tuesday after weeks of acrimonious debate, while Japanese Economics Minister Kaoru Yosano said the government was not considering additional stimulus action until a budget for the current fiscal year is passed. Even as investors played a waiting game, doubts lingered about a fix for the bank industry, still suffering from a drought of confidence and fears about landmines on their balance sheets.

Japan's Nikkei 225 Average finished down 0.4 percent as buying appetite waned after data showed Japan's economy logged its biggest contraction in more than three decades in October-December, hurting exporters such as Sony. Chip-linked shares such as TDK that climbed last week were hit by selling, dragging on the tech-heavy Nikkei, though broad buying of defensive shares provided support.

Seoul shares fell 1.4 percent led by steelmakers and airlines, which were weighed down by the weaker won currency and grim January export data, but SK Broadband's strong gains lent the market support.

Australian stocks closed down 1.2 percent, with sentiment hurt by ongoing financial sector worries and some weak company earnings reports.

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Hong Kong shares dropped 0.7 percent after opening flat, as investors sold down shares including HSBC Holdings and Bank of East Asia as the earnings season kicks off. Bank of East Asia, which leads off the results season for Hong Kong lenders on Tuesday, was down with analysts predicting a 90 percent drop in the bank's 2008 profit partly on account of its exposure to collateralised debt obligation.

Singapore's Straits Times Index fell 1.3 percent. Commodity group Olam International fell as much as 5.8 percent on heavy profit-taking after a surge in the share price last week

China's Shanghai Composite Index gained 1.3 percent in massive turnover as speculative money continued to pour into the market, hunting for brokerage and steel shares in particular. Blue chips were strong while many second-liners pulled back on profit-taking. CITIC Securities climbed as traders bet that a more active equities market would boost its commission income