Asia stocks plunge after U.S., European losses

By Michael Kitchen and Nick Godt, MarketWatch

MUMBAI (MarketWatch) — Asian stocks plunged in Monday trading, with some shares hitting multiyear lows, after renewed fears over Europe’s sovereign-debt crisis led to steep selling in U.S. and European markets at the end of last week.

Japan’s Nikkei Stock Average JP:NIK
-2.28% ended the day with a 2.3% loss — its lowest
close since 2009 — while Hong Kong’s Hang Seng Index HK:HSI
-4.21% plunged 4.2%
lower.

Australia’s S&P/ASX 200 AU:XJO
-3.72% lost 3.7% for the day, and Singapore’s FTSE
Straits Times Index SG:STI
-2.89% fell 2.7%.

South Korean, Taiwanese and mainland Chinese markets were closed for holidays.

The losses came after the Dow Jones Industrial Average DJIA
-2.69% and the S&P 500
SPX
-2.67% each dropped 2.7% on Friday and the Stoxx Europe 600
XX:SXXP
-2.76%
index fell 2.6%. See report on U.S. stock moves Friday.

“Certainly we have seen a very poor performance from the U.S. markets on Friday. ... plus European markets haven’t done very well either, and clearly the local markets are trading down on that,” said Macquarie Private Wealth division director Lucinda Chan.

Chan said the European situation was “the key focus” and that “the markets really aren’t convinced yet” of Europe’s ability to solve its debt crisis.

Among developments hitting shares Friday in Western markets was the resignation of European Central Bank board member Juergen Stark, a proponent of higher interest rates, whose departure was seen by some as signs of a policy dispute at the ECB. Read more on Stark’s resignation from the ECB.

Many financial shares, which are especially sensitive to developments in the European debt situation, plunged in Asia on Monday.

In Sydney, Westpac Banking Corp. AU:WBC
-4.62%
WEBNF
0.00% lost 4.6%, Macquarie
Group Ltd. AU:MQG
-4.22%
MCQEF
+3.13% fell 4.2%, and Commonwealth Bank of
Australia AU:CBA
-4.13%
CBAUF
+3.18% gave up 4.1%.

In Hong Kong, HSBC Holdings PLC HK:5
-5.54%
HBC
-2.55% — which carries a heavy
weighting on the Hang Seng Index — fell 5.5% in morning trade, hitting a two-year low. HSBC is headquartered in London and has large exposure to Europe. The share drop also came on news that the lender’s Hong Kong chief Mark McCombe was leaving the company to work for BlackRock Inc. BLK
-3.07%

Local worries about asset quality and possible fundraising needs for Chinese banks also worked to pull mainland Chinese banks down, led by a 5.8% tumble by Agricultural Bank of China Ltd. HK:1288
-5.81% [
CN:601288
0.00% . See This Week in China column on
questions surrounding soundness of Chinese banks.

Insurers also suffered severely in the financial sell-off in Hong Kong, with Ping An Insurance Group Co. HK:2318
-5.90%
PNGAY
-1.29% tumbling 5.9%, China Life Insurance
Co. HK:2628
-5.75%
LFC
-0.11% diving 5.8%, and AIA Group
HK:1299
-5.18%
AAIGF
-8.33%
down 5.2%.

Japanese banks also fell sharply, with Mitsubishi UFJ Financial Group Inc. JP:8306
-2.71%
MTU
+0.24% down 2.7%, while smaller rivals Shinsei Bank Ltd.
JP:8303
-3.53%
SKLKF
-13.33% and Aozora Bank Ltd.
JP:8304
-3.31% dropped 3.5% and 3.3%,
respectively.

But even worse losses hit Japanese exporters with large European exposure: Sony Corp. JP:6758
-3.40%
SNE
-2.34% shed 3.4%, Sharp Corp.
JP:6753
-5.03%
SHCAF
+1.38% dove
5%, and Honda Motor Co. JP:7267
-3.75%
HMC
-2.91% fell 3.8%.

Shares of Suzuki Motor Corp. JP:7269
-2.75%
SZKMF
-4.16% finished down 2.6% after
news that Volkswagen AG DE:VOW
-3.12%
VLKAF
-2.75% , with which Suzuki has a
partnership, had accused it of violating the two firms’ agreement by procuring diesel engines from a third party. News reports shortly after the Tokyo market close cited Suzuki sources as saying the partnership would be cancelled.

Trade-focused Hong Kong shares dragged lower by European fears, China Cosco Holdings Co. HK:1919
-4.58%
CICOF
-6.14% lost 4.6%, also weighed by concerns about
high-priced charter contracts. See Caixin Online report on Cosco’s charter troubles.

Likewise, apparel and logistics group Li & Fung Ltd. HK:494
-4.45%
LFUGY
-0.27%
dropped 4.5%, hit by its heavy exposure to European markets.

Australian mining shares fell with the broader market, as BHP Billiton Ltd. AU:BHP
-3.85%
BHP
-2.13% fell 3.9%, Rio Tinto Ltd.
AU:RIO
-4.28%
RIO
-2.27% surrendered 4.3%, and
Alumina Ltd. AU:AWC
-7.32%
AWCMF
+3.07%
AWC
-4.22% lost 7.3% of its value.

Going forward, however, Macquarie’s Chan said Sydney-listed resource shares may be among the safer plays, as Chinese economic data released last week suggested a soft landing for the world’s No. 2 economy. See report on Chinese economic data.

“With China being able to cool their economy, this is a positive for Australian equities,” especially resources, said Chan.

Not all analysts, however, were upbeat about the data, with Daiwa Capital Markets saying Friday that, “on balance, we view that the ‘moderation’ in the August headline [consumer price index] is not decisive” and that the Chinese central bank had “little room ... to relax its policy over the near term.”
Add 1299 to portfolio
AIA Group Ltd.
HK$ 24.70
-1.35 -5.18%
Volume: 58.00M
Sept. 12, 2011 4:01p
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Asia stocks plunge after U.S., European losses
07/29
Most Asia markets down on U.S. debt, earnings
06/07
Hong Kong slips, but Japan finds support


Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles.
Nick Godt is a MarketWatch reporter based in Mumbai.