Asian Stocks Fall As Europe Tensions Rise

Many major Asia stock markets fell sharply Tuesday, paring strong year-to-date gains as Europe’s political troubles forced their way back onto the agenda.

Japan’s Nikkei Stock Average  dropped 1.5%, with the move cutting year-to-date gains to 6.7%, while South Korea’s Kospi  fell 0.7%, and Australia’s S&P/ASX 200  lost 0.5%.

In China, Hong Kong’s Hang Seng Index  plunged 1.7%, slicing gains made since the start of the year to 2.8%, while the Shanghai Composite Index  lost 0.4%, though with its 2013 advance still at a robust 6.6%.

“The market isn’t looking at the fundamentals but is back to the binary risk-on/off syndrome as fears over Europe resurface, focused on Spain and Italy,” Kim Eng Securities head of sales trading Andrew Sullivan said in Hong Kong.

“Another issue for Hong Kong is that we are in the runup to Chinese New Year, and retail investors may take this opportunity to lock-in recent gains and take cash to put in their lai-see packets,” he said, referring to the customary red envelopes containing cash gifts exchanged during the holiday.

Euro-fears revive

U.S. stocks took some heavy losses Monday, as uncertainty over Europe rattled investors and triggered a steep pullback from five-year highs.

“The current flare-up in worries has to do with rising political risk in Spain and Italy,” said Barclays Capital strategist Aroop Chatterjee.

“Markets have been increasingly comfortable with European risks over the past few months and are largely not positioned for this increase in political problems. The outcomes in Spain and Italy are far from certain and may represent stumbling blocks for further expansion in risk appetite,” Chatterjee said.

The Hong Kong market suffered particularly heavy selling, with heavyweight HSBC Holdings PLC    — which has a major presence in Europe — down 2.1% amid the concerns over Italy and Spain.

European markets sold down overnight, with opinion polls in Italy showing weakening support for the current austerity reforms, and a political corruption scandal plaguing Spain.

Among other Hong Kong movers, shares of Sinopec — formally known as China Petroleum & Chemical Corp.  — skidded 7% on fears of equity dilution after announcing a $3.1 billion private share placement.

Recent gainers in the consumer, property and financial sectors also suffered losses, with Bank of China Ltd.    lower by 2.5%, and Henderson Land Development Co.  down 2.8%.

In mainland China trading, banks also fell sharply, giving back recent gains, with Agricultural Bank of China Ltd.   falling 2.2% to cut its 2013 advance to 12.9%. China Citic Bank Corp.  fell 2.9%, paring year-to-date gains to 17.5%.

Japanese exporters were also weaker after a recent advance, with Mazda Motor Corp.   down 2.5% after rising 11.4% in February alone. Likewise, Sharp Corp.   fell 3.5%, while Fuji Heavy Industries Ltd.    lost 3%.

Heavyweight retailer Fast Retailing Co. retreated 3.4% after reporting a 5.5% drop in same-store sales at its Uniqlo casual-clothing store chain.

Fujitsu Ltd.   retreated 3.5% after a Nikkei report that the firm will report a fiscal-year net loss of almost ¥100 billion ($1.1 billion), hurt by costs relating to revamping its semiconductor business.

Hitachi Ltd.   fell 6.4% as investors reacted to a lower fiscal-year outlook from the conglomerate and a 38% drop in quarterly net profit, which missed analysts’ expectations.

In Australian trading, hearing-aid company Cochlear Ltd.  tumbled 7.2%, retracing recent gains, after the firm said that it returned to a profit in its fiscal first half but at a lower level than analysts had expected.

An as-expected interest rate decision from the Reserve Bank of Australia did little to ruffle markets, with the benchmark S&P/ASX 200 virtually unchanged as the central bank kept its policy interest rate at 3%.

The South Korean market saw sizeable losses for tech firms, with heavyweight Samsung Electronics Co.    falling 0.4%, and chip maker SK Hynix Inc.    down 2.3%.

Marketwatch