HONG KONG (MarketWatch) — Asian markets skidded Wednesday as investors fretted about the possible tax hikes and spending cuts facing the U.S., with Tokyo stocks dropping from seven-month highs and shares in Shanghai plumbing depths near four-year lows.
Broadly “the lack of progress towards resolving the fiscal cliff is weighing on risk appetite,” in financial asset markets, said Mitul Kotecha at Credit Agricole.
Likewise, the Organization for Economic Cooperation and Development warned Tuesday that “the world economy is far from being out of the woods” and that “the U.S. ‘fiscal cliff,’ if it materializes, could tip an already weak economy into recession.” Read: OECD: Fiscal-cliff failure could trigger recession
/zigman2/quotes/210598127/delayed SHCOMP 3,505.18, -68.17, -1.91%
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -1.53% lost 1.2% in Tokyo for its first decline in five sessions, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.71% gave up 0.7%, Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -1.93% declined 0.2% and the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -2.55% fell 0.6% in Hong Kong.
Taiwan’s Taiex inched up 0.1%, while China’s Shanghai Composite index /zigman2/quotes/206600939/delayed CN:000001 -1.17% lost 0.9%, dropping further to levels it hasn’t seen since January 2009.
“Investors aren’t willing to go into the [Shanghai] market even though it’s at four-year lows,” said Linus Yip, strategist at First Shanghai Securities.
“Selling is not strong, but there’s no buying interest,” he said. “I think that maybe the market needs more indicators that the [Chinese] economy is recovering.”
Cliff drags on stocks, commodities
The losses followed a downbeat session on Wall Street, amid concerns about the U.S. fiscal cliff — the possibility of more than $600 billion of automatic tax hikes and spending cuts kicking in from January, with politicians yet to reach an agreement to resolve their differences on the issue. Read: U.S. stocks fall on fears debt talks have stalled.
Tuesday saw Senate Majority Leader Harry Reid say that there had been “little progress” made toward reaching a deal by the end of the year. See full coverage of the upcoming "fiscal cliff".
The worries also echoed in currency and commodity markets. The ICE dollar index /zigman2/quotes/210598269/delayed DXY -0.19% added to gains in Asia, rising to 80.410 from 80.344 in late North American trading. The appreciation hurt gold futures and also weighed on crude-oil prices.
'Shadow lenders' and China's economy
Private companies in China are increasingly turning to "shadow lenders" to seek loans.
Amid the weakness for commodity futures, energy firms fell in Hong Kong, with Cnooc Ltd. /zigman2/quotes/203421416/delayed HK:883 -1.74% /zigman2/quotes/204964401/composite CEO +0.82% dropping 1.7% and Aluminium Corp. of China Ltd., or Chalco, /zigman2/quotes/208051344/composite ACH -1.68% /zigman2/quotes/202960704/delayed HK:2600 -2.03% /zigman2/quotes/210453246/delayed CN:601600 -2.70% , declining 1.5%.
In Shanghai, Wuhan Iron & Steel Co. lost 4.7%, and Chalco fell 2.1%; Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO -2.86% /zigman2/quotes/202627887/composite RIO +0.37% dropped 1.9% and BHP Billiton Ltd. /zigman2/quotes/201448516/delayed AU:BHP -1.71% /zigman2/quotes/208108397/composite BHP +0.69% lower by 0.6% in Sydney; Posco /zigman2/quotes/209201002/composite PKX -5.01% fell 2.2% in Seoul, and Nippon Steel & Sumitomo Metal Corp. /zigman2/quotes/209782682/delayed JP:5401 +0.74% sank 2.6% in Seoul.
Mining services firm NRW Holdings Ltd. /zigman2/quotes/204111405/delayed AU:NWH -3.82% tumbled 17.8% accompanied by heavy trading volumes in Sydney after flagging an expected fiscal-year revenue and margin reduction at its mining division.
Canon Inc. /zigman2/quotes/207639533/delayed JP:7751 -0.06% /zigman2/quotes/210242912/composite CAJ -1.03% lost 3.1% in Tokyo following a Nikkei report it is seeking to drastically shrink its consolidated inventory by the end of the year, after its stocks hit a level not seen since 2008 in September.
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Fujitsu Ltd. /zigman2/quotes/208459594/delayed JP:6702 -4.54% /zigman2/quotes/208783738/delayed FJTSY -1.74% shed 2.6% after a separate Nikkei report that it will allocate some 100 billion yen ($1.2 billion) to add needed capital to a pension fund at its U.K. unit.
Sony Corp. /zigman2/quotes/201361720/delayed JP:6758 -2.29% /zigman2/quotes/208567357/composite SNE +0.86% fell 1.5%. A Reuters report said investment banks had approached the firm over the possible sale of its battery-making business.
Technology firms also saw losses in Seoul, with LG Electronics Inc. /zigman2/quotes/209966407/delayed KR:066570 -1.50% /zigman2/quotes/206354790/delayed LGEIY 0.00% down 2.7%, and LG Display Co. /zigman2/quotes/204226570/delayed KR:034220 +0.44% /zigman2/quotes/204466928/composite LPL +4.13% 1.2% lower.
In Hong Kong, property companies and banks were under pressure, with China Construction Bank Corp. /zigman2/quotes/208974133/delayed HK:939 -1.16% /zigman2/quotes/207732534/delayed CICHY +0.65% retreating 1.7%, and Henderson Land Development Co. /zigman2/quotes/208724890/delayed HK:12 -2.00% /zigman2/quotes/206540703/delayed HLDVF -5.02% losing 1.3%.
Cosmetics and perfume firm L’Occitane International SA /zigman2/quotes/200886250/delayed HK:973 -7.92% /zigman2/quotes/207624112/delayed LCCTF -2.91% fell 4.9% on disappointment over its earnings report.
Shares of Olam International Ltd /zigman2/quotes/204597429/delayed SG:O32 -2.98% /zigman2/quotes/202776787/delayed OLMIF +1.11% declined 1.4% in Singapore afternoon trading, although the commodities trader denied it was facing the risk of insolvency, in a rebuttal to a report by Muddy Waters LLC. Read blog post: Broker fires back against Muddy Waters’ Olam slam.