Slump in U.S. Home Sales Drags Asian Shares Lower

Asian Shares closed lower Wednesday. In Japan the Nikkei 225 Index slumped 2.9% to end the day at 9,924 and China's Shanghai Composite Index dipped 0.7% to 2,570. In Hong Kong the Hang Seng Index inched up 0.2% to 20,857.

An unanticipated slump in U.S. home sales sent a chill through Asian markets today. With mortgages at all-time lows, Asian exporters are looking for a jump in home sales, spurring buyers to rush out and buy home furnishings, electronics and appliances -- all imported from the East. Instead, sales of previously owned homes dropped 2.2% in May, according to the National Association of Realtors, and sales of newly built homes have fared even worse, plunging 16%. "There's a tight relationship between home sales and outlays on furniture, appliances and building materials," Richard DeKaser, a former economist at the U.S. Bureau of Economic Analysis told Bloomberg. "We've already seen some pullback on housing-related items because of the drop in home construction."

In Japan, companies specializing in building materials closed lower. Nippon Sheet Glass tumbled 2.8%, Okuma, a maker of machine tools fell 2.4%, Hitachi Construction Machinery slid 2.3% and Asahi Kasei, which makes construction materials dropped 2%. Kajima, a contractor with commercial and residential building projects around the world, slumped 3.7% and Obayashi, another builder working internationally, especially in earthquake prone areas like California where they have earthquake-proofed the Golden Gate Bridge and built sturdy office towers, tumbled 2.6%.

A troubled housing market in the U.S. saps consumer confidence, as homeowners worry that the value of their largest asset will dwindle. Japanese electronics companies felt the strain with Panasonic slumping 3.1%, Canon plunging 2.7%, Hitachi falling 2.5% and Pioneer declining 2.1%. Sony retreated 0.6% and Nintendo tumbled 3.6% in Osaka, despite serious gamers' enthusiasm for its latest 3D technology.

Building-related shares also fell in China on renewed concerns that the government will step up tightening measures. Gemdale dropped 1.6%, Poly Real Estate sank 1.5% China Vanke declined 1.2%. Chinese steel companies also closed lower with Baoshan Iron & Steel falling 2.7%, Hebei Iron & Steel tumbling 1.7% and Maanshan Iron & Steel receding 1.2%. Zhuzhou Smelter, a zinc producer, fell 2% and Jiangxi Copper dropped 1.6%.

In Hong Kong, real estate firms with major projects in China declined with China Resource Land plunging 2.6%, China Overseas falling 2.7%, and Hang Lung falling 1.5%. But for others with major holdings in Hong Kong, it was not so gloomy. Henderson Land rose 1.5%, Chung Kong rose 0.8% and Wharf Holdings added 0.6%. According to a report from Centaline Property Agency, the Hong Kong home rental market is climbing, with prices reaching $2.24 per square foot last month -- an increase of 32% from 14 months ago, says Bloomberg BusinessWeek. While jobs are rapidly disappearing in the West, companies in Hong Kong are hiring, and more expats vying for luxurious rentals will surely push up prices.