Asia stock markets lost ground Wednesday, with Shanghai stocks trading sharply lower for a second day, as investors assessed whether the economic outlook supported further gains.
The Shanghai Composite Index was down 1.1% in late afternoon trading, adding to Tuesday’s 1% fall, while Hong Kong’s Hang Seng Index sat 0.7% lower.
Other markets also retreated, giving back some of the recent advance by the region’s equities. Japan’s Nikkei Stock Average ended with a loss of 0.6%, paring year-to-date gains to 17.8%, while Australia’s S&P/ASX 200 index closed 0.5% down, with year-to-date gains now at 9.5%.
In South Korea, the Kospi , edged up 0.2% in late moves, heading toward a fractional gain for the year to date.
Perpetual Investment head of investment strategy Matthew Sherwood said that Asia markets’ broad losses were due to investors becoming progressively nervous about the recent aggressive rally “in light of softening regional earnings and economic prospects for 2013.”
Banks took the brunt of the selling in Chinese trade as the National People’s Congress’ annual session continued in Beijing.
“Financials are weak ahead of a People’s Bank of China talk on monetary policy and financial reform” at the legislative meet, according to Kim Eng Securities head of sales trading Andrew Sullivan.
In Hong Kong, Bank of China Ltd. lost 1.9%, Standard Chartered PLC fell 2.4%, and China Construction Bank Corp. retreated 1.4%.
On the Chinese mainland, Bank of China fell 0.7%, and China Merchants Bank Co. dropped 1.1%.
Broadly, “there’s still concern about the weak [Chinese economic] data out over the weekend,” said Sullivan, referring to a slew of numbers that notably saw the monthly consumer inflation rate tick higher, raising the prospect of tighter monetary policy to control prices.
The Chinese property sector has seen some of the biggest price rises of late, and those firms were performing poorly in Chinese mainland late trading, with China Vanke Co. down 2.6% in Shenzhen, and Gemdale Corp. moving 4.7% lower in Shanghai.
Shipping giant China Cosco Holdings Co. declined 1%, looking set to extend its weekly losses to nearly 8%, fueled in part by the firm’s plans to sell its logistics unit to parent China Ocean Shipping Group Co.
Over in Tokyo, stocks have gained sharply this year on expectation of further central-bank easing, a sentiment which has shown up in the yen’s losses against other currencies. However, the dollar slipped back a bit on Wednesday to trade at ¥95.71, down from ¥96.05 in late North American trading.
With the yen rebounding, some exporter shares struggled. Canon Inc. fell 2.8%, while Panasonic Corp. closed with a 2.9% drop.
But there were some gainers as well: Nikon Corp. rallied 3.2% after a Nikkei news report that the firm is set to slash inventory at its camera business by 20%.
Nippon Paper Group Inc. climbed 1.7% after a separate Nikkei report said the firm is set to enter the Nikkei Average.
As in China, bank stocks weighed on the Australian market, with National Australia Bank Ltd. ending down 1.9% after announcing 800 million Australian dollars ($826 million) of cost cuts over the next five years.
Likewise, Westpac Banking Corp. fell 2.1%, and Australia & New Zealand Banking Group Ltd. retreated 2%, as investors seemed to take a lead from Deutsche Bank equity strategist Tim Baker, who expressed a more negative view on the sector.
“Banks look expensive from a range of angles,” said Baker as he cut the sector from neutral to a small underweight. “Yield support remains, keeping us from a large underweight, but we do see better options elsewhere.”
In South Korean trading, exporters gained as their Japanese rivals weakened, with LG Electronics Inc. up 2%, SK Hynix Inc. rising 0.9%, and Samsung Electronics Co. higher by 2.3%.
The weakness for Asia came after U.S. stocks ended mostly lower Tuesday, as investors fretted about potential global political risk and some weak economic data.
“The sharp drop in U.K. industrial production and a warning by the Bundesbank’s [President Jens] Weidmann that the euro-zone crisis was not over added a dose of caution to the market,” said Crédit Agricole strategist Mitul Kotecha.