By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) — Asian stocks tumbled Thursday as a deterioration in Chinese manufacturing activity and a further spike in Shanghai interbank lending rates applied more selling pressure after the Federal Reserve signaled it may wind down its bond purchases.
Stocks in Hong Kong and Sydney were slammed after preliminary data released by HSBC showed its China Purchasing Managers’ Index for June slipped to a nine-month low of 48.3, staying under the 50-point level for a second straight month. A reading below 50 shows conditions worsened.
The Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.39% slumped 2.9% to finish the day at a nine-month low, and the Shanghai Composite Index /zigman2/quotes/210598127/delayed CN:SHCOMP -0.34% dropped 2.8% for its for its lowest close in more than six months.
/zigman2/quotes/210598127/delayed SHCOMP 3,402.82, -11.67, -0.34%
/zigman2/quotes/210598065/realtime DJIA 30,068.36, +477.09, +1.61%
“Beijing prefers to use reforms rather than stimulus to sustain growth. While reforms can boost long-term growth prospects, they still have limited impact in the short term,” HSBC China economist Hongbin Qu said in a statement accompanying the PMI release.
The losses came as two short-term interbank money market rates jumped to record levels , while the People’s Bank of China refrained from injecting liquidity.
“Money conditions have tightened sharply. ... Such monetary tightening is inconsistent with recent soft patch in terms of growth and a weakening of price pressures,” said Dariusz Kowalczyk, a senior economist at Credit Agricole.
Meanwhile, Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +1.26% fell 2.1%, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.58% lost 2%, Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +2.50% gave up 1.7% and Taiwan’s Taiex dropped 1.4%, after the Fed’s guidance on its bond purchases overnight.
“What caught the market off guard is that the Fed anticipates the pace of recovery in the labor market to be quicker than what the market previously predicted. Consequently, the possibility of scaling down the current bond-buying program is likely to be sooner than what is currently priced in,” said CMC Markets sales trader Miguel Audencial.
Commodity-sector stocks were hurt across the region as prices for gold and other metals dropped after the Fed’s announcement.
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Shares of Cnooc Ltd. /zigman2/quotes/203421416/delayed HK:883 -0.44% /zigman2/quotes/204964401/composite CEO +0.87% skidded 4.4% and gold miner Zijin Mining Corp. /zigman2/quotes/204517000/delayed HK:2899 -3.11% /zigman2/quotes/209836076/composite ZIJMF -3.85% fell 1.8% in Hong Kong, while Jiangxi Copper Co. /zigman2/quotes/201334192/delayed CN:600362 +5.06% /zigman2/quotes/204256025/composite JIXAY +9.41% slid 3.9% in Shanghai.
In Sydney, Fortescue Metals Group Ltd. /zigman2/quotes/202351558/delayed AU:FMG +2.73% /zigman2/quotes/204116626/composite FSUMF +2.37% lost 6.6%, also weighed after it cut its outlook for iron-ore shipments, and gold miner Newcrest Mining Ltd. /zigman2/quotes/203840223/delayed AU:NCM -6.11% /zigman2/quotes/206026738/composite NCMGF -2.32% gave up 3.6%.
Energy producer Inpex Corp. /zigman2/quotes/206689846/delayed JP:1605 +2.26% /zigman2/quotes/206936121/composite IPXHF -11.95% dropped 3.7% in Tokyo, and Korea Zinc Co. /zigman2/quotes/202765860/delayed KR:010130 +0.25% gave up 1.6% in Seoul.
Chinese banks extended losses in the absence of any efforts by policy makers to ease tight money-market conditions.
Heavyweight stock China Construction Bank Corp. /zigman2/quotes/208062653/delayed HK:9 -8.33% /zigman2/quotes/208974133/delayed HK:939 -1.02% /zigman2/quotes/207732534/composite CICHY +0.28% /zigman2/quotes/208058581/delayed CN:601939 -1.04% lost 5.2%, and Industrial & Commercial Bank of China Ltd. /zigman2/quotes/201401473/delayed HK:1398 -1.31% /zigman2/quotes/202401350/composite IDCBY -1.19% /zigman2/quotes/202525815/delayed CN:601398 -0.39% shed 3.8% in Hong Kong. The banks’ Shanghai-listed shares fell 2% and 2.2%, respectively.
The People’s Bank of China — China’s central bank — “is worried by the unsustainable growth rate of credit and is sending a message that market participants shouldn’t take for granted that they will always have access to cheap interbank loans,” Capital Economics wrote in a note to clients.
The Next 24: International markets react to Fed
Overseas stocks react to today's Fed news, while Rite Aid and Kroger are due to report before the U.S. open.
Real-estate stocks retreated in Japan after the Fed’s decision, with Sumitomo Realty & Development Co. /zigman2/quotes/206628792/delayed JP:8830 +4.59% losing 4.9% and Mitsui Fudosan Co. /zigman2/quotes/205394574/delayed JP:8801 +2.71% /zigman2/quotes/208297288/composite MTSFF +4.24% dropping 3.8%.
Among other notable decliners, shares of Nikon Corp. /zigman2/quotes/203281219/delayed JP:7731 -0.29% /zigman2/quotes/209396469/composite NINOY -1.04% fell 5.8%, Hitachi Construction Machinery Corp. /zigman2/quotes/205375504/delayed JP:6305 +2.14% /zigman2/quotes/202415695/composite HTCMY +4.02% gave up 5.3%, and convenience-store operator Seven & I Holdings Co. /zigman2/quotes/207666111/delayed JP:3382 +2.45% /zigman2/quotes/210292336/composite SVNDY +1.91% shed 2.7%.
But some automobile exporters advanced as the U.S. dollar jumped after a rally in Treasury yields overnight in the wake of the Fed decision. Shares of Subaru-maker Fuji Heavy Industries Co. /zigman2/quotes/203522406/delayed JP:7270 +2.99% /zigman2/quotes/200526066/composite FUJHY +1.24% rose 1%, and Mazda Motor Corp. /zigman2/quotes/204777714/delayed JP:7261 +4.87% /zigman2/quotes/206326885/composite MZDAY +3.41% climbed 2.2%.
Banks and other high dividend-yield issues fell in Australia after the the Australian dollar /zigman2/quotes/210560947/realtime/sampled AUDUSD +0.9060% got knocked below 93 U.S. cents in the wake of the Fed’s decision.
Shares of Westpac Banking Corp. /zigman2/quotes/203084975/delayed AU:WBC +2.61% /zigman2/quotes/206661702/composite WBK +3.81% lost 3.7%, and Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA +1.96% /zigman2/quotes/207018701/composite CBAUF +2.63% fell 3.1%.