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Asian Stocks Fall on Bank Regulation Worry

CNBC.com with Reuters
Wednesday, 19 May 2010 | 3:25 AM ET

Asian stocks lost ground across the board but pared earlier losses on Wednesday, as moves to toughen financial regulation in both the U.S. and Europe rattled markets and sapped investors' appetite for risk.

Wall Street's main indexes slid between 1.1 percent and 1.6 percent as reforms introducing harsher regulation of banks moved closer to being enacted by U.S. lawmakers.

Investors were also unnerved by news Germany had moved to ban naked short-selling in certain securities, which triggered a sharp slide in the euro to four-year lows.

Japan's Nikkei average fell 0.5 percent to a nearly three-month closing low as worries about tighter U.S. and German financial rules spurred selling in the euro and other riskier assets.

But short-covering helped the benchmark pare losses that earlier took it down nearly 2 percent.

The benchmark Nikkei lost 55.80 points to 10,186.84, after earlier falling nearly 2 percent to 10,041.93, the lowest since mid-February and well below its 200-day moving average of around 10,350.

A slight recovery in the euro after it fell to a four-year low against the dollar helped stocks pare losses, with some exporters turning positive.

The euro was flat against the yen at 112.11 and had edged up minutely against the dollar to $1.290. But the dollar was down 0.3 percent against the yen at 91.97 yen.

Digital camera maker Canon fell 1.1 percent to 3,930 yen and chip tester maker Advantest lost 0.6 percent to 2,183 yen, both well off earlier lows.

Sony rose 2.7 percent to 2,911 yen on short-covering after two days of falls this week.

Banks trimmed losses as well. Mizuho Financial Group was flat, Sumitomo Mitsui Financial lost 0.6 percent to 2,725 yen. Top lender Mitsubishi UFJ Financial turned positive, gaining 0.7 percent to 452 yen.

Japan's largest bank by assets said on Tuesday it had returned to profit in the past year due to smaller writedowns, but is targeting annual growth that is below market expectations.

Toyota Motor shed 0.6 percent to 3,510 yen after the world's biggest automaker said it plans to recall four models of its Lexus luxury car in Japan due to steering problems, its latest move in a series of massive recalls.

Seoul Slides 0.8%

In South Korea, shares posted their lowest close in over two months, hit by continuous foreign selling, but automakers bounced back with car parts maker Mando soaring in its market debut.

The Korea Composite Stock Price Index declined 0.80 percent to 1,630.08 points.

Shares at Mando extended gains to close at a session high of 111,500 won, far above its IPO price of 83,000 won. The company raised 498 billion won ($435 million) in its float earlier this year near the middle of the indicative range.

Within the banking sector, Woori Finance retreated 4.3 percent, tracking its U.S. peers as they fell overnight on worries about sweeping reform of financial regulations.

Australian Stocks Hit 8-Month Low

Shares in Australia moved similarly to their Asian counterparts, falling 1.9 percent to an eight-month low, with investors fleeing from risky assets as sentiment took a hit on worries about further financial regulation.

The benchmark S&P/ASX 200fell 83.6 points to 4,387.1, breaking through support at the May 7 low of 4,427 to reach its lowest level since August 21, 2009.

The Australian market has dived 4.9 percent so far this week.

The banking sector saw losses, with declines of 2.2 percent to 3.7 percent. National Australia Bank was the leading laggard with a drop of 3.7 percent to A$23.80.

Retailers were mostly weaker, after data showed Australian consumer confidence posted its biggest monthly decline since the Lehman collapse as households felt the pain of three straight rate hikes.

David Jones outperformed, rising 0.47 percent to A$4.29, despite missing forecasts with third-quarter like-for-like sales growth of 1.4 percent. The upmarket chain was hampered by a weak retail environment and unseasonably warm weather.

Resources stocks also trekked south. Global miners BHP Billiton and Rio Tinto fell 0.7 percent and 1.5 percent respectively.

BHP Billiton's CEO has warned that dividend payments could be hit by the government's proposed tax on resource company profits. He also said that investment in major projects in Australia, could move offshore if the tax went ahead.

Shares of Fortescue Metals tumbled after news that the iron ore miner put $15 billion in new projects on hold, citing the country's proposed new mining tax and piling pressure on Canberra to scrap it or water it down.

Asciano Group fell 1.6 percent. The port and rail operator has urged regulators to intervene in the $6 billion sale of a coal-rail network in northern Queensland state, a move that could delay the country's biggest IPO this year.

HSI Drops 1.4%

Hong Kong stocks lost 1.8 percent after fears over tougher financial regulation in the U.S. and Europe led to a selloff in global markets.

The benchmark Hang Seng Index was down 359.90 points at 19,580.8. The China Enterprises Index of top locally listed mainland Chinese stocks fell 2.31 percent at 11,162.69.

Denway sank 13 percent to HK$3.89 after parent Guangzhou Automobile offered a share swap to take the company private. Analysts said the estimated valuation of Guangzhou Auto shares at 12.5-13.5 times 2010 earnings was more expensive than rivals.

Europe-focused fashion retailer Esprit dropped as much as 5.2 percent to an eight-month low, erasing all Tuesday's gains, on persistent fears that the uncertain economic situation in Europe could dent demand and the company's overseas sales.

Macau casino operator SJM Holdings, flagship company of gambling tycoon Stanley Ho, rose 4.2 percent after the firm said its net profit for the first quarter of 2010 more than
quintupled to HK$760 million ($97.47 million).

Shanghai, Taipei End Lower

China's key Shanghai Composite Index ended 0.2 percent lower at 2,587.8 points in a choppy session, giving up modest gains in the afternoon and following 1.4 percent rise on Tuesday.

The country's property shares eased after a rally the day before as worries about tightening measures weighed on sentiment.

Taiwan stocks closed 0.3 percent lower, led by tech shares such as top contract chip maker TSMC, amid worries over the health of the global economy and demand for technology products.

In Southeast Asia, Singapore's STI was also in the red, sliding 1.5 percent to 2,799.5 points.

Wilmar International, the largest listed palm oil producer, plunged as much as 8.7 percent to S$5.65, its lowest level in almost 10 months, rocked by Indonesian media reports on tax fraud allegations.

In a statement to the Singapore stock exchange on Tuesday, Wilmar said the reports were "untrue and unsubstantiated" and its Indonesian units "are and have at all times been in full compliance with all relevant Indonesian value added tax laws."