By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Asian markets stumbled on Monday after China reported weaker-than-expected economic growth and industrial production, feeding doubts about the pace of recovery and the outlook for the region’s largest economy.
The sluggish Chinese economic indicators added to the selling pressure in markets already weighed by a strong rebound in the yen, as well as a commodity-price slump and weak cues from Wall Street on Friday.
The Shanghai Composite /zigman2/quotes/206600939/delayed CN:000001 -0.06% ended 1.1% lower, and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.09% gave up 1.4% after figures showing the Chinese economy expanded 7.7% in the first quarter from the year-earlier period.
The slowdown followed a 7.9% expansion in the fourth quarter and was weaker than the 8% growth anticipated by economists. Industrial output for March, at 8.9% from the year-ago month, was also weaker than projected.
“The official ‘target’ for GDP this year is 7.5%, so this print remains on track from that perspective, but consensus expectations for 8% to 8.5% may need to reconsider their positions. Expectations for [People’s Bank of China] policy-tightening by year-end needs to be shelved for now,” said TD Securities head of Asia-Pacific research Annette Beacher.
Stock indexes in other regional markets that count China as a key trading partner also extended early losses.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.39% dropped 1.6%, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.33% lost 0.9%, Taiwan’s Taiex gave up 0.7% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.49% shed 0.2%.
“2013 is starting to look eerily like 2012. ... Another year of propped-up growth via state spending and a credit deluge would, we fear, push China dangerously close to proving [former premier] Wen Jiabao correct — that the current economic model is ‘unsustainable,’” economists at IHS Global Insight led by Alistair Thornton wrote to clients.
“There is plenty more downside risk out there than upside risk. We have lost confidence in a robust recovery,” they said.
A number of Chinese stocks fell sharply on disappointment over the economic data.
Sany Heavy Industry Co. /zigman2/quotes/204938792/delayed CN:600031 +1.29% lost 2.4%, Ping An Insurance Group Co. /zigman2/quotes/202773380/delayed CN:601318 -1.08% /zigman2/quotes/202212125/delayed PNGAY +0.21% dropped 1.6%, and Great Wall Motor /zigman2/quotes/206189068/delayed CN:601633 +3.02% /zigman2/quotes/200918371/delayed GWLLF 0.00% gave up 1.4% in Shanghai trading.
In Shenzhen, Zoomlion Heavy Industry Science and Technology Co. /zigman2/quotes/201560657/delayed CN:000157 +1.09% /zigman2/quotes/200468019/delayed ZLIOF +1.27% dropped 5.5% — also weighed by a profit warning issued Friday — and Chongqing Changan Automobile Co. /zigman2/quotes/208414644/delayed CN:000625 +4.24% shed 4%.
In Hong Kong, Industrial & Commercial Bank of China Ltd. /zigman2/quotes/201401473/delayed HK:1398 -0.36% /zigman2/quotes/202401350/delayed IDCBY -1.19% retreated 1.5%, and footwear maker Belle International Holdings Ltd. gave up 2.2%.
Monday’s drop in Japanese equity markets came after the U.S. Treasury on Friday warned Japan not to actively weaken its currency. The yen rebounded sharply after the remarks, with the U.S. dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.2346% dropping below ¥98 on Monday, versus ¥98.92 in the U.S. late on Friday.
“Currency wars are back on the agenda as U.S. and Europe ‘remind Japan of its pledge not to drive down its currency,’” said Evan Lucas a market strategist at IG Markets. “The inverse correlation between the yen/Nikkei [Average] is almost ironclad, and will add to the downward pressure regionally.”
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In Tokyo trading, Honda Motor Co. /zigman2/quotes/200490352/delayed JP:7267 -0.07% /zigman2/quotes/207173990/composite HMC +0.92% gave up 1.8%, Hitachi Ltd. /zigman2/quotes/203839937/delayed JP:6501 -0.26% shed 3.2%, and Bridgestone Corp. /zigman2/quotes/205589013/delayed JP:5108 -0.73% /zigman2/quotes/204111038/delayed BRDCY -1.31% retreated 2.5% on the local currency’s rise.
On the upside, a report Saturday in the Nikkei business daily that Sharp Corp. /zigman2/quotes/203224600/delayed JP:6753 -0.54% /zigman2/quotes/207472799/delayed SHCAF +3.24% would unload its more than 9% stake in Pioneer Corp. helped lift both firms’ shares significantly. Pioneer’s shares climbed 4.3%, and Sharp’s soared 10.5%.
Commodity stocks in the region suffered particularly hard Monday after gold futures, which slumped to hit their lowest level in 21 months in the U.S. on Friday, continued to drop in Asia on Monday after the Chinese data, accompanied by declines in other commodities. Read more about oil’s decline below $89 a barrel in Asia.
BHP Billiton Ltd. /zigman2/quotes/201448516/delayed AU:BHP -0.78% /zigman2/quotes/208108397/composite BHP -1.54% skidded 3.1%, and Newcrest Mining Ltd. /zigman2/quotes/203840223/delayed AU:NCM +1.45% /zigman2/quotes/203286036/delayed NCMGY -0.22% plunged 8.2% in Sydney.
In Tokyo, steel maker JFE Holdings Inc. /zigman2/quotes/203557603/delayed JFEEF -20.06% /zigman2/quotes/204336633/delayed JP:5411 -0.18% stumbled 3.8%, while in Seoul, Korea Zinc Co. /zigman2/quotes/202765860/delayed KR:010130 -1.79% plummeted 14%.
In Hong Kong, oil major Cnooc Ltd. /zigman2/quotes/203421416/delayed HK:883 -0.33% /zigman2/quotes/204964401/composite CEO +0.43% lost 3.1%, and Zhaojin Mining Industry Co. /zigman2/quotes/203361399/delayed HK:1818 +3.37% /zigman2/quotes/200275285/delayed ZHAOF +0.77% slumped 10%; in Shanghai, Zijin Mining Industry Co. /zigman2/quotes/203833875/delayed CN:601899 +2.40% /zigman2/quotes/209836076/delayed ZIJMF -5.75% fell 5.6%, and Jiangxi Copper Co. /zigman2/quotes/204256025/delayed JIXAY -2.94% /zigman2/quotes/201334192/delayed CN:600362 +0.13% tanked by 4.7%.