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May 31, 2012, 4:17 a.m. EDT

Asian markets stumble over Europe fears

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By Virginia Harrison and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Most Asian markets sank Thursday as fresh worries about Spain and Italy sparked fears of a deteriorating situation in Europe, leading investors to dump risk assets amid rising global uncertainty.

First Shanghai Securities strategist Linus Yip said fund managers were looking to square their positions for month-end, driving out of Asia equities and into “the safe-haven of U.S. debt markets, because risk levels are so high.”

Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +0.40%  gave up 1.1%, Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.31%  dropped 0.3% and Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO +0.59%  shed 0.4%.

China’s Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 -1.46%  gave up 0.5% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.42%  slipped 0.1%, while Taiwan’s Taiex  defied the general trend to finish 0.6% higher.

The downbeat session was set to round out a bleak month for the region. Hong Kong’s index contracting 11.7% in May, paring year-to-date gains to just 1.1%. Read more on Hong Kong stocks’ year-to-date wash.

Among other regional benchmarks, Japan’s Nikkei lost 10.3% during the month, followed by a 7.3% drop for the S&P/ASX 200, 7% loss for the Kospi, 2.7% fall for the Taiex and a 1% decline for the Shanghai Composite.

Click to Play

Who's at the door? Japan, and they're buying!

Cash-rich Japanese companies are going on a worldwide buying spree, and they’ve learned lessons from the 1980s. Photo: Bloomberg News.

The day’s losses came after European fears knocked U.S. stocks sharply lower Wednesday. Bond yields in Spain and Italy surged, while fresh polls showing Greek support for anti-austerity parties added to uncertainty surrounding the euro currency bloc. Read more on the U.S. session.

Investors also remained focused on Spain and Italy.

“Hopes that Spain can manage without some sort of bailout package are fading fast,” said Capital Economics European economist Mark Miller.

The concerns hit the euro /zigman2/quotes/210561215/realtime/sampled EURJPY +0.0286% , with the single currency’s Japanese yen cross-rate falling to ¥97.71 after trading north of ¥99 the previous day.

The surging yen hurt Europe-exposed exporters, particularly in the tech sector. Pioneer Corp.   dropped 2.6% and Advantest Corp. /zigman2/quotes/206869087/delayed JP:6857 +1.17%   /zigman2/quotes/202479540/composite ADTTF +1.36%  gave up 3.7%.

Disappointing industrial production data for April also weighed, with Komatsu Ltd. /zigman2/quotes/204002437/delayed JP:6301 +0.41% /zigman2/quotes/206435044/composite KMTUF +2.43% down 2.6%, and Hitachi Construction Machinery Co. /zigman2/quotes/205375504/delayed JP:6305 +0.17%  off by 2%. Read more on Japan's industrial production.

Other export-tied firms gave ground across Asia. Samsung Electronics Co. SSNGY 0.00%  dropped 1.2% and LG Electronics Co. LGEIY 0.00% lost 1.6% in Seoul. In Hong Kong, merchandise supplier Li & Fung Ltd.   slumped 5.9% and Prada SpA /zigman2/quotes/200575701/delayed HK:1913 -2.87%   /zigman2/quotes/204689658/composite PRDSY +2.94% lost 3.5%.

Chinese property firms saw heavy losses, with Agile Property Holdings Ltd. /zigman2/quotes/210448079/delayed HK:3383 -1.28% /zigman2/quotes/200754284/composite AGPYY +16.31%  falling 1.1% and China Overseas Land & Investment Ltd. /zigman2/quotes/205731176/delayed HK:688 -0.20%   /zigman2/quotes/202573805/composite CAOVY -0.95% tumbling 4.3% in Hong Kong; on the mainland bourses, Poly Real Estate Group Co. /zigman2/quotes/201864015/delayed CN:600048 +1.91%  dropped 1.3% in Shanghai, while China Vanke Co.  dropped 0.6% in Shenzhen.

Reflecting waning investor appetite, London-based jeweller Graff Diamonds Corp. stalled a planned $1 billion initial public offering in Hong Kong, blaming adverse market conditions. Read more on Graff Diamonds IPO cancellation.

Resource firms sold down sharply, after many commodity prices fell overnight amid concerns about global growth.

Tokyo-listed steel maker JFE Holdings Inc. /zigman2/quotes/204336633/delayed JP:5411 -1.77% /zigman2/quotes/203557603/composite JFEEF -11.43%  shed 0.9%, while in Sydney, diversified miners BHP Billiton Ltd. /zigman2/quotes/201448516/delayed AU:BHP +1.99%   /zigman2/quotes/208108397/composite BHP +2.38%  and Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO +3.28%   /zigman2/quotes/202627887/composite RIO +2.44%  fell 0.6% and 0.9%, respectively.

Fortescue Metals Group Ltd. /zigman2/quotes/202351558/delayed AU:FMG +1.36%   /zigman2/quotes/207124211/composite FSUGY +0.15% dropped 4.4% after Chief Executive Officer Nev Power said the iron-ore producer will likely pause its expansion next year in favor of paying down debt. Read more on Fortescue CEO comments.

Energy firms similarly skidded, with Oil Search Ltd. /zigman2/quotes/204702973/delayed AU:OSH +2.62% /zigman2/quotes/205045633/composite OISHY -0.93%  losing 1.2% in Sydney, after benchmark U.S. oil futures fell below $88 a barrel. Elsewhere in the region, Cnooc Ltd. /zigman2/quotes/204964401/composite CEO +1.64%   /zigman2/quotes/203421416/delayed HK:883 -0.68%  dropped 1.1% in Hong Kong, while Inpex Corp. /zigman2/quotes/206936121/composite IPXHF -2.21%   /zigman2/quotes/206689846/delayed JP:1605 -0.85%  shed 2.8% in Tokyo. Read more on oil.

Electrical utilities ranked among the few rising stocks in Tokyo, after a Kyodo News report that Prime Minister Yoshihiko Noda was considering reactivating some of Japan’s nuclear reactors, none of which are currently in operation.

Kansai Electric Power Co. /zigman2/quotes/200592152/delayed JP:9503 +1.37%  jumped 3.2%, Tokyo Electric Power Co. /zigman2/quotes/202771076/delayed JP:9501 -0.63%   /zigman2/quotes/204529331/composite TKECF -1.99% rose 2.6%, and Hokkaido Electric Power Co.   /zigman2/quotes/209956657/delayed JP:9509 +1.50%  rallied 3.7%. Read more on Japan electric utilities.

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¥ 407.00
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2.46%
Market Cap
¥82.82 billion
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Virginia Harrison is a MarketWatch reporter based in Sydney. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.

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