By Chris Oliver, MarketWatch , Colin Ng
HONG KONG (MarketWatch) -- Asian stock indexes ended mixed
Tuesday, with Chinese shares led down by property and financial
stocks amid investors' concerns that Saturday's interest-rate
increase could be the first of a series of rounds of tightening by
Beijing.
"Suddenly the possibility is open that there could be two more
hikes or three more hikes," said Robert Howe, chief executive
officer of hedge fund Geomatrix in Honolulu, referring to the
potential for further policy announcements by the People's Bank of
China. "The market perception has changed."
He said that most investors were not expecting Chinese
authorities to raise rates again before year's end and that selling
over the past two days reflected adjustments of such measures on
expected corporate earnings.
The Shanghai Composite Index dropped 1.7%, adding to the
previous session's 1.9% slide, to end at its lowest closing level
in nearly three months.
Japan's Nikkei Stock Average fell 0.6%, and South Korea's Kospi
Composite was 0.6% higher in late trade
Hong Kong's Hang Seng Index dropped 0.9% in its first trading
session following the extended weekend break. Taiwan's main index
lost 0.2% and India's Sensex was little changed in late action.
Markets in Australia and New Zealand were shut for a holiday.
In Japan, the major indexes were in the red throughout the
duration of trading, pressured by the yen's strength against the
U.S. dollar and weighed by U.S. stocks' weaker session Monday in
New York.
One analyst said that while the yen's strength in recent
sessions was holding back investor sentiment, the Japanese currency
was unlikely to rally back to its 80-pairing to the U.S. dollar
seen in October.
Mizuho Investors Securities senior strategist Masatoshi Sato
said selling was limited by the government's industrial-output
forecasts just before the market opened. The reports projected a
3.4% rise in December and a 3.7% gain in January.
"This data will alleviate concerns that the Japanese economy,
now at a standstill, will decline further," he said.
Japan's core consumer-price index in November fell 0.5% from a
year earlier, compared with a projected fall of 0.6% in a Dow Jones
Newswires and Nikkei poll of economists. Industrial production in
November rose 1% from the month before, in line with
expectations.
HSBC Securities chief economist Seiji Shiraishi said the CPI
data showed Japan was still in a strong deflationary trend. He
added that it would be hard for Japan to overcome deflation given
factors such as its declining population.
However, "deflation may ease (in coming months) if the global
economic conditions prove strong" and "help Japan's external
demand, leading to a rise in domestic demand," he said.
Among major exporters, Canon (CAJ) lost 1.7% and Honda Motor
(HMC) dropped 1.1%.
Mizuho Financial Group (MFG) added 1.3%, supported by President
and Chief Executive Takashi Tsukamoto's comments in a Dow Jones
Newswires interview that the company's efforts to meet
capital-adequacy requirements were progressing and there was no
need to issue additional new shares.
In Shanghai, concerns over the policy outlook were highlighted
by a report Tuesday that cited a central bank adviser, Li Daokui,
as saying China must introduce further tightening measures in 2011
-- particularly in the first half -- to rein in rising
inflation.
China Vanke , the nation's largest property developer by market
share, declined 4.8% in Shenzhen, and Poly Real Estate Group fell
6.2% in Shanghai.
Financial stocks were also weak in Shanghai, with securities
firms leading declines as investors gauged their outlook in light
of tighter policy.
Citic Securities lost 2.1% and Everbright Securities fell 3.1%.
In Hong Kong, Chinese property developers, which depend on bank
lending to finance their projects, led the decline. China Overseas
Land (0688.HK) fell 2.3%.
"This latest interest-rate hike underlines the [Peoples Bank of
China's] continued determination to contain rising inflationary
risks," HSBC wrote in a note.
In Seoul, heavyweight technology plays were mostly higher.
Samsung Electronics (SSNHY) gained 1.7% and Hynix Semiconductor
(HXSCF) rose 3.7%.
Meanwhile construction-related stocks were higher on hopes for
an improvement in earnings next year. Daewoo Engineering &
Construction rose 5%.
In spite of the positive session, one analyst said there was
limited fuel for further gains in the Kospi as many traders have
closed positions and moved to the sidelines for the remainder of
the year.
Elsewhere in the region, Philippine shares were basically flat,
dropping 0.1%, Malaysian shares gained 0.4%, and Singapore's
Straits Times Index rose 0.8%. Thai shares rose 0.8% in late
trading.
In foreign-exchange markets, the dollar was at 82.31 yen,
against 82.84 yen in late New York trade Monday. The euro was at
$1.3227 versus $1.3147, and 108.79 yen against 108.88 yen.
Spot gold was at $1,390.70 a troy ounce, up $6.60 from its New
York close Monday while February Nymex crude-oil futures were up 11
cents at $91.11 a barrel.