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May 30, 2012, 1:34 a.m. EDT

Asia stocks fall as China stimulus hope fades

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By Virginia Harrison and Nick Godt, MarketWatch

MUMBAI (MarketWatch) — Asia stock markets fell Wednesday, giving up some of the strong gains from the previous session, as hopes for an aggressive stimulus spending in China faltered, and as more trouble in Spain posed fresh threats to the euro zone.

Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +0.40%  and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.42%  both lost 0.3%, while Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO +0.59%  fell 0.5%.

In China, Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.31%  slumped 1.9%, and the Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 -1.46%  shed 0.2%.

Optimism about Chinese stimulus measures to power the economy took a hit after a state media report suggested the package will be relatively mild, compared to actions taken at the height of the global financial crisis, in late 2008. Read more on the extent of likely Chinese stimulus measures.

Click to Play

Staff cuts part of Panasonic restructuring

Japanese electronics maker Panasonic will cut staff at its Osaka headquarters as the company tries to revive recent losses.

Financials slumped in Hong Kong, with Bank of Communications Co. /zigman2/quotes/203442771/delayed HK:3328 -1.24%   /zigman2/quotes/208048873/composite BKFCF -1.69%   /zigman2/quotes/207155262/delayed CN:601328 -1.41%  down 1.4% and China Life Insurance Co. /zigman2/quotes/202359856/delayed HK:2628 +1.21%   /zigman2/quotes/206573290/composite LFC -1.94%  losing 1.9%.

Strategists at Barclays Capital said that while fresh easing measures could provide short-term upside for Chinese banking stocks, “resorting to investment stimulus and rates cuts are contrary to what China needs in the long run, namely economic rebalancing to consumption-driven .... deleveraging of the economy.”

Hong Kong-listed property firms also suffered, with Sino Land Co. /zigman2/quotes/202960683/delayed HK:83 -2.14%   /zigman2/quotes/206858840/composite SNLAY +9.77%  down 1.8% and Sun Hung Kai Properties Ltd. /zigman2/quotes/209086152/delayed HK:16 -1.85% /zigman2/quotes/205427525/composite SUHJY -2.09%  losing 1.6%.

However, property shares listed on mainland bourses moved in the other direction, with Gemdale Corp. /zigman2/quotes/208026094/delayed CN:600383 +0.06%  rising 1% in Shanghai and China Vanke Co.  up 0.4% in Shenzhen.

Spain worries

Chinese stimulus concerns added to existing offshore worries weighing on sentiment in Asia.

More credit rating downgrades for Spain and a Financial Times report that the European Central Bank rejected the nation’s bank-recapitalization plans highlighted distress in the euro zone and pressured the common currency. Read report on ECB's rejection of Spain's Bankia plans.

Weakness for the euro weighed on some leading exporters in Tokyo, as Sony Corp. /zigman2/quotes/201361720/delayed JP:6758 +3.27%   /zigman2/quotes/208567357/composite SNE +1.53%  traded down 1.9%, Toshiba Corp. /zigman2/quotes/204149068/composite TOSYY -1.18%    /zigman2/quotes/205628942/delayed JP:6502 -0.97%  lost 1.7%, and Sharp Corp. /zigman2/quotes/203224600/delayed JP:6753 -0.17%   /zigman2/quotes/207472799/composite SHCAF -4.17%  slumped 3%.

NEC Corp. /zigman2/quotes/205173342/delayed JP:6701 +0.18%  took a 2.6% drop, with the firm set to buy the IT operations of Australia’s CSG Ltd . CSG shares surged 18.4% in Sydney.

Technology firms were also weak in Seoul, where Samsung Electronics Co. SSNGY 0.00%  retreated 1% and LG Electronics Inc. LGEIY 0.00%  dropped 0.9%.

On the upside, stock in Olympus Corp. /zigman2/quotes/200860615/delayed JP:7733 -0.63% /zigman2/quotes/206207642/composite OCPNY -1.34%  climbed 4% following an Asahi Shimbun report that the firm is in talks to form a capital alliance with Panasonic Corp. /zigman2/quotes/201785256/delayed JP:6752 +0.95%  or Sony to help shore up its balance sheet. Panasonic shares surrendered 2.2%. Read more on reported Olympus tie-up plans.

Renesas Electronics Corp. /zigman2/quotes/203872935/delayed JP:6723 -0.84%   /zigman2/quotes/201351352/composite RNECY -3.99% remained in focus — and shares soared 27.5% — after Dow Jones Newswires cited the company as saying reports of a major restructuring were “sensational” in nature.

Stock in resource firms dragged across the region as commodity prices eased overnight.

Diversified Citic Pacific Ltd. /zigman2/quotes/205176597/delayed HK:267 -0.62%   /zigman2/quotes/208232395/composite CTPCF +17.65% , which has a presence in iron ore mining, slumped 1.8% in Hong Kong, while in Sydney, diversified miner Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO +3.28% /zigman2/quotes/202627887/composite RIO -0.27% gave up 1.4%.

Australian gold producer Newcrest Mining Ltd. /zigman2/quotes/203840223/delayed AU:NCM +1.72% /zigman2/quotes/203286036/composite NCMGY +0.72%  slumped 2.3% after a sharp drop in gold futures in New York overnight.

Energy firms also came under selling pressure after crude-oil futures traded below $91 a barrel in electronic trading.

Tokyo-listed JX Holdings Inc. /zigman2/quotes/208590403/delayed JP:5020 -0.21%  declined 2.2%, while Hong Kong-traded shares of Cnooc Ltd. /zigman2/quotes/203421416/delayed HK:883 -0.68%   /zigman2/quotes/204964401/composite CEO -2.47% dropped 1.7%, and Sydney-listed Santos Ltd. /zigman2/quotes/207349564/delayed AU:STO +4.13%  gave up 1.3%.

Still in Australia, shares of Wesfarmers Ltd. /zigman2/quotes/204567133/delayed AU:WES +0.37% /zigman2/quotes/201861689/composite WFAFY -0.97%  eased 0.2% as investors reacted to a sales and strategy update from the conglomerate, which cited a challenging market environment for its Officeworks chain. Read more on Wesfarmers’ sales update.

Also dragging on Australian retailers, government data showed the country’s retail sales disappointed with a 0.2% drop in April. Read more on Australia’s April retail sales.

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Virginia Harrison is a MarketWatch reporter based in Sydney. Nick Godt is a MarketWatch reporter based in Mumbai.

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