Asian markets sink on Chinese tightening concerns

Asian markets sank today in a delayed reaction to tightening moves by Chinese authorities. Shanghai and Hong Kong led the falls. While many commentators have worked themselves into a lather about Ireland’s potential debt problems, the €90 billion hole is a flea against the €8 trillion GDP elephant produced each year in China.

In China, the Shanghai and Shenzhen indices both lost more than 2.5% by mid day today as investors remain concerned about the continuing roll out of tightening measures undertaken by the Chinese government. Chinese investors are dumping material and energy stocks in order to reduce the riskier assets in their portfolio. Index stocks Petrol China, China Shenhua and China Petroleum & Chemical Corp lead the fall. Financial stocks were also out of favour with investors.

In Hong Kong, the Hang Seng Index lost 420 points or 1.8 % to 23,103. The property sector extended its losses for the second day as investors worried that property company earnings might be hurt by a new stamp duty on residential transactions and other tightening measures imposed by the HK government.

Given Australia’s high level of engagement with Asian growth economies, there was nowhere for the local share market to turn. Unsurprisingly, resource stocks were hardest hit. Global mining stocks dropped more than the market average, but it was the smaller miners that took it in the neck, with falls of more than 5 % common across the sector.

The general weakness spread across the market, and volumes picked up from low levels this morning as losses accelerated. Financials, industrials and consumer related stocks all dropped away, some reversing earlier gains. Normally defensive healthcare stocks also fell. The only sector to post a gain on the day was telecommunications, dominated by Telstra. Its shares rose 3% on the day after broker upgrades, recapturing some of the 34% share price fall since the beginning of the year.