By Daniel Inman
Stocks in Shanghai and Hong Kong led Asia's losses Wednesday, with Chinese banks falling on concerns about liberalization's impact on their bottom lines, while a stronger yen weighed on Japanese stocks.
The Shanghai Composite /zigman2/quotes/210598127/delayed CN:SHCOMP +0.06% and Hong Kong's Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.25% closed 1.5% and 1.7% lower, respectively, after news that China's four state-owned banks and a former state policy bank will issue a total of 19 billion yuan ($3.1 billion) of negotiable certificates of deposit, the latest step in China's move toward less-restricted interest rates. Liberalization has prompted concerns that the banks will face short-term pressure on their profits.
Unlike ordinary bank deposits, the interest rate on the new certificates requires the banks to negotiate the cost of capital between themselves.
In Hong Kong, Agricultural Bank of China /zigman2/quotes/204629388/delayed CN:601288 -0.27% /zigman2/quotes/200705246/delayed HK:1288 -1.73% and China Construction Bank /zigman2/quotes/208058581/delayed CN:601939 -0.31% /zigman2/quotes/208974133/delayed HK:939 -1.33% fell 2% and 2.4%, respectively, while HSBC Holdings PLC /zigman2/quotes/202687335/delayed HK:5 0.00% /zigman2/quotes/208272822/composite HSBC +0.60% , the single-largest constituent on the Hang Seng Index, fell 1.3% after it said it had agreed to sell its 8% stake in Bank of Shanghai to Spain's Banco Santander SA /zigman2/quotes/202859081/composite SAN +0.73% /zigman2/quotes/205677933/delayed ES:SAN +0.95% . HSBC didn't say how much it was selling the stake for, but it valued the holding at $468 million on Sept. 30.
More broadly, the region followed the U.S. lower, after stocks on the Wall Street fell overnight as investors sold to cash in some of the strong gains for the year and continued to worry about the potential impact of a reduced Federal Reserve stimulus.
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Speculation over when the Fed will start to roll back its bond-buying program has been a persistent theme in Asia since the early summer, when it sparked a series of selloffs in the region. Recent employment data from the U.S. have been strong, which has raised expectations that the Fed could start to withdraw its stimulus as early as in its December policy meeting next week, giving trading a general air of caution.
This caution could be seen in the dollar’s movement against the yen, which pulled back overnight, after spending much of Tuesday with striking distance of challenging its year high. The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.9386% lost a total of 0.4% against its Japanese counterpart overnight and was last trading at ¥102.73, compared with ¥102.84 late Tuesday in New York.
The yen’s push back against the dollar weighed on Japanese stocks, with the Nikkei /zigman2/quotes/210597971/delayed JP:NIK -0.17% closed 0.6% lower.
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South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.19% fell 0.8%.
In Australia, the S&P ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.20% fell 0.8%, a three-and-a-half month low, as investors continued to worry about the impact of a flurry of initial public offerings hitting the market before the end of the year.
Shares in QBE Insurance Group /zigman2/quotes/207050271/delayed AU:QBE -0.26% /zigman2/quotes/201857553/composite QBEIF -0.87% gained 1.8% after J.P. Morgan upgraded the company to neutral after falling a total of 32% on Monday and Tuesday. The insurer’s surprise profit warning earlier this week had hit broader sentiment in Sydney.