Asian stocks mostly lower as China shares tumble on concerns banks to raise more capital

Thursday, September 16, 2010

Asia markets down as China falls on bank jitters

BANGKOK — Asian and European markets were mostly lower Thursday as China shares tumbled on concerns that banks will need to raise more capital.

But Japan’s market mostly held on to its big gain from the previous day when Tokyo intervened in the currency market for the first time since 2004 to weaken the yen.

The benchmark Nikkei 225 stock index fell 7.06 points, or 0.1 percent, to 9,509.50. The index jumped more than 2 percent Wednesday as investors cheered Japan’s action to knock the yen off a 15-year high against the dollar.

China’s Shanghai Composite Index slid 1.9 percent to a three-week low of 2,602.46 as investors fretted the banking regulator will order banks to raise the amount of capital they hold in reserve following a surge in lending over the previous year. The Shenzhen Composite Index for China’s smaller second exchange dropped 2.2 percent to 1,156.51.

“It refreshed concerns that banks will face pressure to sell shares,” said Peng Yunliang, an analyst for Shanghai Securities.

Australia’s S&P/ASX 200 dropped 1.2 percent to 4,605.30 and South Korea’s Kospi declined 0.7 percent to 1,811.85. Hong Kong’s Hang Seng fell 0.2 percent to 21,691.45.

But India’s Sensex climbed 0.3 percent to 19,556.88, shrugging off a larger-than-expected interest rate hike by the central bank.

As trading got underway in Europe, France’s CAC-40 was down 0.3 percent at 3,745.92, Britain’s FTSE 100 fell 0.2 percent to 5,544.49 and Germany’s DAX retreated by 0.1 percent to 6,252.12. Wall Street was set to fall with Dow futures off 37, or 0.4 percent, at 10,472.00 and S&P futures lower by 4.4, or 0.4 percent, to 1,116.30.

The dollar, meanwhile, continued to trade above 85 yen following the move by Japan’s finance ministry and central bank Wednesday to buy dollars to weaken the surging yen.

The dollar had fallen below 83 yen after Prime Minister Naoto Kan survived a leadership challenge Tuesday from another ruling party lawmaker. Currency traders had bet that Kan was unlikely to intervene.

Speaking at a business leaders’ meeting Thursday, Kan said Japan will “continue to take firm action” against the yen’s rise, which is sapping strength from the country’s already fragile economic recovery.

Japanese officials did not provide a figure for how much yen the central bank had sold in the market. But Japan’s top business daily Nikkei said the government may have sold more than two trillion yen ($23.4 billion), which would be largest single-day intervention on record.

On Wall Street, the Dow Jones industrial average rose 46.24, or 0.4 percent, to close at 10,572.73. It was the index’s highest close since Aug. 10. The Dow still 5.6 percent below its 2010 high reached on April 26, and up only 1.4 percent for the year to date following steep declines in May and June.

Benchmark crude for October delivery was down 76 cents at $75.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 78 cents to settle at $76.02 a barrel on Wednesday.

The euro rose to $1.3060 from $1.3007.

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