Asian Markets Brace for Cooling Chinese Economy

In Asia Friday China's Shanghai Composite Index slid 0.7% to 2,984 and Hong Kong's Hang Seng Index increased 0.4%. In Japan the Nikkei 225 Index inched down 0.1%.

New numbers out of Beijing show that China's economy is indeed cooling off. In the third quarter, growth of only 9.6%, compared to 10.3% for the previous quarter, is the smallest gain seen so far this year. Inflation in the People's Republic has increased and consumer prices have risen, spurring the government to take action.

Everything seems to be carefully choreographed by policy-makers in an effort to moderate growth and prevent any bursting asset bubbles from shocking the economy -- worryingly, housing prices are still at an all-time high. An emerging-market strategist at Royal Bank of Canada told Bloomberg that the government seems to be seeking "a middle course between overheating and a sharp downturn."

Banks in China continued yesterday's decline after the central bank increased interest rates. Agricultural Bank of China tumbled 2.7%, China Construction Bank plunged 1.9% and Industrial & Commercial Bank of China fell 1.7%.

Jiangxi Copper Co. added 2.1%, leading commodity producers higher despite a fall in the price of copper. Yunnan Copper shot up 4% while other raw materials producers also advanced. Aluminum Corp. of China, known as Chalco, added 1.1% and Zijin Mining gained 0.6%.

In Hong Kong, China Mobile sank 1.5%, China Unicom, which provides telecom services in China, tumbled 1.2%, while Tencent, another mobile service provider, surged 4.4%.

Meanwhile, Hong Kong Banks were on the rise. Bank of China soared 1.8%, Bank of Communications added 1.4% and HSBC rose 0.6%.

Among Hong Kong-listed auto companies, Brilliance China Automotive Holdings sky rocketed 16.2% in today's trading. Geely Automobile, the new owner of the Volvo Brand, gained 5.6% and Warren Buffett-backed BYD advanced 1.9%.

In Japan banks led the Nikkei lower with Mitsubishi UFJ tumbling 1%, Mizuho Financial losing 0.8% and Sumitomo Mitsui Financial Group slipping 0.6%. Another big loser was Central Japan Railway, which dropped 3.3% in today's trading.

Among Japanese car companies, Nissan slumped 1.5%, Isuzu slid 0.6% and Honda inched down 0.4%. Toyota, however, managed a 0.4% rise, despite reports that the carmaker is recalling 1.5 million vehicles worldwide, including the Crown and Mark X due to engine defects.