HONG KONG (MarketWatch) — Asian stocks tumbled in a broad-based sell-off Wednesday as investors reacted to news that Greece’s political impasse would force new elections in the country by dumping equities, with Hong Kong and South Korean shares taking the biggest hit.
The Greek news overcame relatively positive U.S. economic data to send the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.34% to near a four-month low overnight, offering a negative lead for the Asia markets. Read more on Tuesday’s U.S. stock trade.
“Investors are thinking: We don’t know what’s going to happen with Greece, we don’t know what’s going to happen with Europe, we’re just going to sit it out,” said Andrew Sullivan at Piper Jaffray.
Sullivan added that trading volumes were up, “which would indicate some investors are just throwing the towel in.”
Greece heads for elections
Greek Socialist leader Evangelos Venizelos says the country is heading for new elections after coalition talks fail, with the euro falling below $1.28 on the news. Photo: Bloomberg.
Amid concerns that elections in Greece will ultimately lead to the country leaving the euro zone, Sullivan said: “It’s just imponderable as to how you play Greece coming out of the euro zone. ... It’s very difficult to know how to play that in Asia. Investors can’t get an inside line on this — there’s no precedent.”
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +1.04% was among the region’s worst performers Wednesday, plunging 3.2%, with Sullivan citing the Hong Kong market’s relatively high liquidity as making it easy to sell out of. The drop marked the index’s worst percentage decline since Nov. 10, when it sank 5.2%.
Also suffering a loss in excess of 3%, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +1.29% fell 3.1%.
Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.21% wasn’t far behind with a 2.4% drop, as a sharp fall in commodity prices sent major mining names lower.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +1.32% dropped 1.1%, China’s Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 +0.79% lost 1.2%, Taiwan’s Taiex gave up 2.2% and India’s Sensex /zigman2/quotes/210597966/delayed IN:1 +1.59% was down 1.9% in afternoon trading.
Tony Brennan, Citigroup head of Australia and New Zealand investment strategy, said Wednesday that the most likely case now involves Greece leaving the euro within the next 18 months. However, “policy action in Europe will help limit the fallout,” he said.
Barclays Capital analysts were more pessimistic about potential support measures, at least for the short term.
“To arrest market fears, proactive measures are needed. Unfortunately, they seem nowhere in sight. This suggests that risky assets are likely to trade erratically at best, with a bias to underperform.”
Among the riskier assets are cyclical stocks closely tied to global growth, such as miners, and the Greek news hit Australian-listed miners especially hard Wednesday.
BHP Billiton Ltd. /zigman2/quotes/201448516/delayed AU:BHP -1.25% /zigman2/quotes/208108397/composite BHP -0.49% and Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO -1.48% /zigman2/quotes/202627887/composite RIO -1.32% — the Australian mining sector’s two largest players — tumbled 4.1% and 3.9%, respectively. Uranium-focused miner Paladin Energy Ltd. /zigman2/quotes/203269866/delayed AU:PDN -7.41% /zigman2/quotes/202157125/delayed PALAF -0.19% dropped 9.3%.
Commodity players were also trading with sharp losses in Hong Kong, with Aluminum Corp. of China Ltd. /zigman2/quotes/202960704/delayed HK:2600 +0.64% /zigman2/quotes/208051344/composite ACH -1.55% down 3.3%, PetroChina Ltd. /zigman2/quotes/204979431/delayed HK:857 +1.72% /zigman2/quotes/205108732/composite PTR +0.10% lower by 3.8%, and China Coal Energy Co. /zigman2/quotes/201486584/delayed HK:1898 +2.15% /zigman2/quotes/206249154/delayed CCOZF -0.81% dropping 6.9%.
Banks likewise suffered in Hong Kong, with Bank of Communications Co. /zigman2/quotes/203442771/delayed HK:3328 +4.37% /zigman2/quotes/208048873/delayed BKFCF -7.41% down 3.9%, and China Citic Bank Corp. /zigman2/quotes/205809997/delayed HK:998 +1.01% /zigman2/quotes/204346887/delayed CHBJF -13.04% diving 5.4%.
However, the largest Japanese banks initially offered some support in Tokyo after the top three lenders all posted solid profits, managing to sidestep the euro-zone crisis. Read report on earnings for Japan’s top three banks.
Mizuho Financial Group Inc. /zigman2/quotes/204507985/delayed JP:8411 +1.23% /zigman2/quotes/200950467/composite MFG +1.14% managed to hold on to some of its early gains in the afternoon, rising 1.8%, while Sumitomo Mitsui Financial Group Inc. /zigman2/quotes/203656770/delayed JP:8316 +0.48% /zigman2/quotes/206471416/composite SMFG +0.34% fell into negative territory but outperformed the market with a 0.3% decline.
Early advances for Mitsubishi UFJ Financial Group Inc. /zigman2/quotes/207520099/delayed JP:8306 +1.16% vaporized, with the bank’s shares dropping 1.4%.
Major Japanese exporters dragged on the Tokyo market as the European uncertainty outweighed a weaker yen, with the U.S. currency /zigman2/quotes/210561789/realtime/sampled USDJPY -0.2122% climbing back above the ¥80 level.
Among the decliners in Tokyo, Renesas Electronics Corp. /zigman2/quotes/203872935/delayed JP:6723 +2.53% /zigman2/quotes/201351352/delayed RNECY +3.86% retreated 3.5%, Toyota Motor Corp. /zigman2/quotes/203803129/delayed JP:7203 +2.10% /zigman2/quotes/200537742/composite TM +0.85% gave up 2.1%, Fujitsu Ltd. /zigman2/quotes/208459594/delayed JP:6702 +0.67% /zigman2/quotes/208783738/delayed FJTSY -1.43% fell 2.9%, and Bridgestone Corp. /zigman2/quotes/205589013/delayed JP:5108 +1.28% /zigman2/quotes/201520388/delayed BRDCF -1.25% lost 2%.
In Hong Kong, Europe-exposed apparel firm Esprit Holdings Ltd. /zigman2/quotes/205943307/delayed HK:330 -5.95% /zigman2/quotes/209270177/delayed ESHDF -53.33% fell 5.5%, while Chinese computer major Lenovo Group Ltd. /zigman2/quotes/205368244/delayed HK:992 -1.00% /zigman2/quotes/201114980/delayed LNVGF -6.45% dropped 4.5%.
Back in Australia, logistics firm Toll Holdings Ltd. /zigman2/quotes/200941264/delayed THKUF 0.00% plunged 15.2% after warning on its underlying earnings for the current fiscal year. Read more on Toll’s warning.