Hint of Chinese Interest Rate Hike, Obama's Banking Regulations Send Asian Shares Tumbling

Markets were down in Asia Friday, with Japan's Nikkei 225 Index plunging 2.6% to close at 10,591. In China, the Shanghai Composite Index fell 1% to 3,129 and in Hong Kong the Hang Seng Index slid 0.7%, ending the day at 20,726.

Chinese investors withdrew $348 million from equity funds last week, according to Bloomberg. Investors are getting the jitters due to the swirl of hints that Chinese authorities could make a speedy move to cool the overheated economy. Many pundits speculate that there may be an interest rate hike as soon as this weekend. This news, combined with the threat that Obama could introduce further regulations on bank trading, sent shares tumbling.

Metals shares closed sharply lower with Angang Steel (ANGGY) plunging 4.3%, Baoshan Iron & Steel falling 3.3% Jiangxi Copper dropping 2.5% and Aluminum Corp. of China, also known as Chalco, losing 1.7%.

China is wrestling with strategies for slowing the record lending that has led to speculation and inflation. In December, inflation rose 1.9% and the country's GDP increased 10.7% in the fourth quarter, according to Bloomberg. But tightened lending would curb the record sales of property and cars -- big ticket items the Chinese have been buying with their newly found, or borrowed, wealth. Today China Vanke, the country's largest property developer, fell 3.2% and Poly Real Estate slid 2.9%. DongFeng Automobile, which has joined forces with Honda to build a new Chinese plant to handle the expanding demand for cars, plumetted 5.3%, Chongqing Changan Automobile slid 2.7% and FAW Car lost 2.3%.

In Hong Kong, carmakers also slipped, with Great Wall Motor tumbling 4.7% and Geely losing 1.3%. Even Warren Buffett-backed BYD Co. suffered, losing 3.1% in today's trading.

Despite the carnage, banking shares rose in both Hong Kong and China. Both Bank of Communications and China Merchants Bank climbed 3.2% and China Construction Bank rose 2.2% in China. In Hong Kong Industrial & Commercial Bank of China gained 2.8%, but HSBC, the stock with the most weight on the Hang Seng index, lost 1.6%.

Also in Hong Kong, oil company Cnooc slumped 2.4% to HK$11.56, making it the second-biggest drag on the Hang Seng index, China Shenhua Energy lost 1.1%, China Coal Energy lost 0.8%.

In Japan, it was much the same story, with mining-related shares taking a hit. Mitsui Mining & Smelting tumbled 3.4% Nippon Mining and Nippon Oil both plunged 3.2% and Japan Steel Works fell 3%.

Car companies were also among the losers with Toyota shares reeling from the recall of 2.3 million U.S. vehicles with a possible flaw that could cause accelerator pedals to stick. Toyota slumped 3.2% and Honda receded 2.4%. Mitsubishi Motors fell 3.6%.

Even Fast Retailing, the Japanese operator of the fantastically colorful and moderately priced Uniqlo shops, was battered today, falling 4.2% and popular Department store operator UNY, with major stores in Japan and Hong Kong, endured a 2.9% fall. A ripple in the market can shake the confidence of even the most committed shopper.
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