Asia Stocks Take Double Hit From Fed, China Data

Asian stocks fell Thursday as data showed Chinese manufacturing activity deteriorating further in June, adding to the selling pressure after the Federal Reserve signaled it may wind down its bond purchases if the U.S. economy continued to improve.

Stocks in Hong Kong and Australia were hit hard 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  dropped to a nine-month low during the session, and was down 2.4% by late morning in Hong Kong, while the S&P/ASX 200  fell 2.2% in Sydney.

The Shanghai Composite Index , which ended at a six-month low on Wednesday, dropped a further 1.5%.

The benchmark has lost nearly 8% so far this month amid concerns over an increase in interbank borrowing rates and worries that Chinese regulators may soon give their approval to resume initial public offerings, leading to an increase in the supply of shares.

“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.

Elsewhere in the region, Japan’s Nikkei Stock Average  gave up 1.1%, South Korean’s Kospi  lost 1.4%, and Taiwan’s Taiex dropped 1.1%, 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 pressured across the region as prices for gold and other metals skidded lower after the Fed’s announcement.

Shares of Cnooc Ltd.   tumbled 4.4%, and gold miner Zijin Mining Corp.   skidded 4.1% in Hong Kong, while Jiangxi Copper Co.  slid 1.6% in Shanghai.

In Sydney, Fortescue Metals Group Ltd.  lost 6%, also dragged lower after it cut its outlook for exports, and gold miner Newcrest Mining Ltd.  gave up 2.7%.

Energy producer Inpex Corp.   dropped 3.6% in Tokyo, and Korea Zinc Co.  gave up 2.5% in Seoul.

Chinese banks extended losses in the absence of any efforts by policy makers to ease tight money-market conditions.

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.

Heavyweight stock China Construction Bank Corp.    lost 4%, and Industrial & Commercial Bank of China Ltd.     shed 3% in Hong Kong. The banks’ Shanghai-listed shares fell 1.3% and 1.5%, respectively.

Real-estate stocks retreated in Japan after the Fed’s decision, with Sumitomo Realty & Development Co.  losing 3.3% and Mitsui Fudosan Co.   dropping 1.7%.

Among other notable decliners, shares of Nikon Corp.  fell 4.8%, Hitachi Construction Machinery Corp.  gave up 4.5%, and convenience-store operator Seven & I Holdings Co. shed 2.9%.

But some automobile exporters advanced as the U.S. dollar jumped alongside a rally in Treasury yields after the Fed decision, although the sharp losses on Wall Street weighed on most firms

Shares of Subaru-maker Fuji Heavy Industries Co.  rose 1.3%, and Mazda Motor Corp.   climbed 3%.

Banks and other high dividend-yield issues fell in Australia after the the Australian dollar  got knocked below 93 U.S. cents in the wake of the Fed’s decision.

Shares of Westpac Banking Corp.   lost 3.9%, and Commonwealth Bank of Australia  fell 2.9%.

Source : Marketwatch