HONG KONG (MarketWatch) — Most Asian markets fell Thursday on profit-taking after recent gains, with Chinese stocks suffering a sharp drop on concern about the weakening economy, while Hong Kong shares ended higher after a choppy trading session.
Trading volumes were weak across much of the region, in the absence of overnight cues from Wall Street, following a U.S. holiday Wednesday. Also, caution prevailed ahead of Thursday’s interest-rate setting meetings at the European Central Bank and the Bank of England, where they were expected to unveil more easing. Read MarketWatch’s ECB preview.
The day’s worst performer was China’s Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 -4.31% , which dropped 1.2% amid concerns that a slew of data due next week might offer more evidence of a slowdown in the mainland economy. The drop followed Tuesday’s reports of lackluster growth in June lending figures at the nation’s top four banks.
Barclays economists sid they expect Chinese consumer prices to rise 2.1% in June, slowing sharply from a 3% increase in May, and for the country’s second-quarter gross domestic product to slow to 7.5% from the year-ago period, versus 8.1% in the first quarter.
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However, the research house estimated that GDP growth may bottom in the April-June period, adding that it expects “recent government measures to stabilize growth to have more impact on investment and activity in June.”
Royal Bank of Scotland strategists attributed the day’s drop in Chinese equities to “speculation that government would not loosen property restrictions.”
While losses were spread across a number of sectors in Shanghai, notable decliners included Qingdao Haier Co. /zigman2/quotes/200743595/delayed CN:600690 -3.54% , down 4.3%, Haitong Securities Co. /zigman2/quotes/203443667/delayed CN:600837 -4.29% , 4.2% lower, and Anhui Conch Cement Co. /zigman2/quotes/204422624/delayed CN:600585 -3.48% , off 3.7%.
The day’s drop came even as some large-capital stocks outperformed the broad market. Energy giant PetroChina Co. /zigman2/quotes/205108732/composite PTR -1.64% /zigman2/quotes/206980083/delayed CN:601857 -2.95% rose 0.2%, Industrial & Commercial Bank of China Ltd. /zigman2/quotes/202401350/delayed IDCBY -1.38% /zigman2/quotes/202525815/delayed CN:601398 -2.97% gained 0.3%, Poly Real Estate Group Co. /zigman2/quotes/201864015/delayed CN:600048 -3.81% added 1.8% and China Life Insurance Co. /zigman2/quotes/206573290/composite LFC -4.46% /zigman2/quotes/204766889/delayed CN:601628 -7.05% climbed 1.8%.
Elsewhere in the region, Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -1.06% dropped 0.3%, Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -0.61% slipped 0.1% and Taiwan’s Taiex gave up 0.5%.
The day’s weak performance losses followed advances made earlier in the week, with most of the regional benchmarks also posting gains in June.
After a choppy trading session that saw them change direction a few times with investor on Europe, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.81% finished 0.1% higher and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.84% gained 0.5%.
Capital Economics strategist Ben May said the ECB was likely to cut interest rates by 0.25 percentage points Thursday, “with the euro zone’s debt crisis intensifying again and the economic downturn broadening.”
“But the bank seems unlikely to announce more long-term lending, believing that the financial system as a whole has enough liquidity,” May said.
Shares of many Chinese heavyweights also found buying support in Hong Kong trading, with ICBC /zigman2/quotes/201401473/delayed HK:1398 -1.96% rising 0.2%, China Life /zigman2/quotes/202359856/delayed HK:2628 -6.70% climbing 2.7% and PetroChina Co. /zigman2/quotes/204979431/delayed HK:857 -3.83% adding 0.8%.
Those advances helped offset China Coal Energy Co.’s /zigman2/quotes/201486584/delayed HK:1898 -3.77% /zigman2/quotes/205321671/delayed CCOZY 0.00% 0.3% and China Resources Land Ltd.’s /zigman2/quotes/209191868/delayed CRBJY +11.87% /zigman2/quotes/202417326/delayed HK:1109 -1.27% 0.5% drop after strong gains recently.
Meanwhile, many energy sector shares were sold down in other parts of Asia after oil futures pulled back from a recent rally.
In Tokyo, Inpex Corp. /zigman2/quotes/206689846/delayed JP:1605 -4.84% /zigman2/quotes/207958170/delayed IPXHY -5.98% dropped 1.2%, Oil Search Ltd. /zigman2/quotes/204702973/delayed AU:OSH -4.15% /zigman2/quotes/205045633/delayed OISHY +0.31% fell 1.6% and Woodside Petroleum Ltd. /zigman2/quotes/203437212/delayed AU:WPL -2.36% /zigman2/quotes/206334215/delayed WOPEY +1.08% gave up 0.7% in Sydney.
Shares of BlueScope Steel Ltd. /zigman2/quotes/201850153/delayed AU:BSL +0.84% /zigman2/quotes/203756272/delayed BLSFY -8.65% sank 4.6% in Sydney, after the firm said it had will pay a 21.2 million Australian dollar ($21.8 million) charge to the Australian Tax Office, pending the outcome of a dispute. Read more on BlueScope tax payment.
Aquila Resources Ltd. shot up 3.4% after the Nikkei reported Japanese trading company Sumitomo Corp. /zigman2/quotes/209745829/delayed JP:8053 -1.87% would acquire a 50% interest in an Australian coal mine from Aquila for A$442 million. Shares of Sumitomo eased 0.4% in Tokyo.
Osaka Securities Exchange Co. /zigman2/quotes/201068873/delayed JP:8697 -3.46% added 1.1% after Japanese regulators approved its proposed merger with Tokyo Stock Exchange. Read more on the exchange merger.
Shipping-related firms lent support in Seoul, with Daewoo Engineering & Construction Co. rising 1% and Hyundai Heavy Industries Co. gaining 0.4%.
However, shares of Hyundai Motor Co. /zigman2/quotes/204364212/delayed HYMTF -2.39% lost 0.9% and affiliate Kia Motors Corp. /zigman2/quotes/205439169/delayed KIMTF +8.21% shed 0.5% as their labor unions moved closer to a strike. Read more on latest Hyundai and Kia labor trouble.
Shares of sports-apparel firm Li Ning Co. /zigman2/quotes/200624860/delayed HK:2331 -4.90% jumped 7.3% in Hong Kong after the company announced a new three-year transformation plan, including the replacement of its chief executive with the company’s founder. Read more on Li Ning shake-up.