TAIPEI (MarketWatch) — Hong Kong and South Korean stocks tumbled to lead Asian markets lower Tuesday as fears about spreading European debt troubles rattled investors, hitting financial shares and exporters especially hard.
“There’s a lot of offshore fear about European debt contagion. It’s layer on top of layer now of uncertainty in Europe,” said Peter Esho, chief market analyst at City Index in Sydney. The European Central Bank “can’t manage to address even short-term issues, while things in the pipeline keep emerging, and all that really weighs on market sentiment,” he added.
Stock losses quickened in late afternoon trading in Asia, with Hong Kong and Indian markets losing more ground, following media reports citing Dutch Finance Minister Jan Kees de Jager as saying that a selective default of Greece was no longer excluded from the options being considered by the euro zone. Steep early losses for Italian stocks also unnerved investors. Read more on Dutch minister's Greek comments.
The Hang Seng Index HK:HSI -3.06% slumped 3.1% to 21,663.16 for its biggest one-day percentage drop since May 2010. The Shanghai Composite CN:000001 -1.72% dropped 1.7% to 2,754.58 and South Korea’s Kospi KR:0100 -2.20% skidded 2.2% to 2,109.73.
Japan’s Nikkei Stock Average JP:NIK -1.42% ended the day 1.4% lower at 9,925.92, Australia’s S&P/ASX 200 index AU:XJO -1.90% lost 1.9% to 4,495.40 and Taiwan’s Taiex declined 2% to 8,491.01. In afternoon trading, India’s Sensex IN:1 -1.53% was down 2%.
“Investor confidence remains quite shaky,” said Ben Kwong, chief operating officer at KGI Asia, adding that the strength of the U.S. dollar and the Japanese yen is leading investors to unwind their long positions in the commodity and equity markets.
“I think this will trigger some fund outflows. ... Previously, because of the strong euro and the weak U.S. dollar, funds were flowing into these [stock and commodity] markets. But it seems that the trend has reversed now,” said Kwong.
Financial stocks bore the brunt of the sell-off. In Tokyo, Shinsei Bank Ltd. JP:8303 -2.33% SKLKF -2.30% gave up 2.3%, and Nomura Holdings Inc. JP:8604 -3.27% NRSCF -3.19% lost 3.3%.
Macquarie Group Ltd. AU:MQG -6.03% MQBKY -4.82% fell 6%, and National Australia Bank Ltd. AU:NAB -3.71% NABZY -2.91% shed 3.7% in Sydney. In Hong Kong, heavyweight HSBC Holdings PLC HK:5 -2.99% HBC -1.73% dropped 3% and Industrial & Commercial Bank of China Ltd. HK:1398 -4.01% IDCBY -3.13% sank 4%.
Exporters in Japan and other markets were also among notable losers.
With European debt concerns rising , the euro weakened against the yen EURJPY -1.56% amid concerns that the crisis was spreading to other nations such as Italy. The European unit plunged to ¥110.55 by late afternoon in Hong Kong from its ¥114.90 level at the end of last week, which dragged Japanese exporters lower. Read more on euro, currencies.
Sony Corp. JP:6758 -3.04% SNE -0.89% dropped 3%, and Canon Inc. JP:7751 -1.81% CAJ -2.14% was off by 1.8%, shrugging off a report that showed sentiment for Japanese manufacturers returning to positive territory for the first time since the massive earthquake in March. Read more on Japanese business sentiment.
“We think the current euro-zone policy framework, which relies on country-specific bailouts, is not workable for Italy, given its size. It will be very hard for euro-zone policy makers to quickly devise a policy response which effectively deals with Italy’s problems,” Nomura strategist Jens Nordvig wrote in a note to clients.
The lack of resolution in the U.S. debt-ceiling talks added to the uncertainty over the broader global economy. Read more on the U.S. debt ceiling negotiations
“When you put all these things together, the market gets very nervous and [this] weighs on equities,” said City Index’s Esho.
Bucking the broader trend was Marcarthur Coal Ltd. AU:MCC +36.64% MACDY +30.13% , with shares soaring 36.6% after Peabody Energy Corp. BTU -3.52% and ArcelorMittal MT -4.39% made a 4.7 billion Australian dollar ($4.9 billion) bid for the coal miner. Read more on the takeover bid for Marcarthur Coal.
Shares in News Corp. NWS -7.10% AU:NWS -4.59% fell 4.6% as the News of the World phone-hacking scandal continued to weigh on the stock and threatened to stymie the company’s efforts to take full ownership of television broadcaster British Sky Broadcasting Group PLC UK:BSY -2.03% . News Corp. is the owner of MarketWatch, the publisher of this report.
In India, shares of Infosys Ltd. INFY -3.14% IN:500209 -4.25% tumbled 4.9% in afternoon trading on disappointment over the software developer’s growth forecasts.
Virginia Harrison is a MarketWatch reporter based in Sydney.
Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.
