Chinese Economic Tightening Measures Rock Asian Markets


Asian markets lost value Tuesday. In China the Shanghai Composite Index tumbled 4% to 2,895 and in Hong Kong the Hang Seng slid 0.4% to end the day at 23,693. Japan's Nikkei 225 Index edged down 0.3% to 9,797.

In China, a plunge in the Shanghai Composite Index could mean an end to the country's amazing bull run that has created masses of wealth since its start in early October. New policies tightening lending to developers and ordering banks to raise capital reserve ratios are surely causing some investors to pull their money out of the market. "There have been some lingering jitters over further monetary tightening measures," an analyst from Central China Securities told the Wall Street Journal. "And with Chinese investors extremely sensitive to policy changes, some may have chosen to withdraw to the sidelines until there is more clarity."

Coal stocks were among the worst hit on Shanghai's big board today. Datong Coal plummeted 9.3%, Yanzhou Coal Mining dived 9.2% and Shanxi Zishan Coal & Electricity Power tumbled 6.8%. Metals also nosedived with Jiangxi Copper plunging 8.7% and Aluminum Corp. of China losing 5%. Mining company Mongolia Baotou Steel Rare-Earth Hi-Tech slumped 8.1%, while blue chip Baoshan Iron & Steel declined 3.7% and Maansan Iron & Steel slid 2.7%.

Oil and gas companies also weakened with PetroChina dropping 6.5% and Sinopec losing 5.3%.

Chinese property companies, which have become accustomed to reaping massive gains, sank to their lowest point in over six weeks. In addition to curbs on loans, second and third home purchases and other restrictions, the government is now tackling the issue of overseas buyers. According to Bloomberg, foreigners will now need to prove they've been employed in the People's Republic for at least a year before completing transactions and that they don't own any other Chinese properties. This could cramp the style of many an expat banker intent on scooping up luxe properties in Shanghai and Beijing with hefty bonuses earned in Hong Kong or Singapore. Today Poly Real Estate plunged 4.2%, China Vanke fell 3.8% and Gemdale slid 2.9%.

Hong Kong Developers Feel the Pain

The new home-buying rules were bad news for Hong Kong developers as well. China Overseas fell 3.2%, Henderson Land slid 1.9% and Cheung Kong suffered a 1.6% drop.

Among Hong Kong-listed telecom companies doing business in China, Tencent plunged 3.2% despite last week's news that third quarter profits were up by a whopping 52%. China Unicom lost 1.5%.

There were a few gainers in Hong Kong today with Cathay Pacific rising 3.4% on a bright forecast. The company expects profits to more than double for the year on increased travel in the region. Hang Seng Bank managed a 2.1% increase and Bank of East Asia climbed 1.8%.

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In Japan consumer lenders saw steep gains with Promise rallying 7.2%, Aiful leaping 6.3% and Acom advancing 3.9%. But these gains were countered by losses among metal companies and oil explorers with Inpex losing 2.1% and Japan Petroleum Exploration falling 0.8%.

Japanese utilities were also a major drag on the index with Tokyo Gas down 1.6%, Kansai Electric Power retreating 1.1% and Tokyo Electric Power dipping 0.3%.

But there were other bright spots: Best Bridal, with a booming wedding planning business, catapulted up 12% and Gakken Holdings, which publishes a host of educational magazines and books motored up 9.9%. Not surprising for a country where traditional weddings can hover at the $100,000 mark and education is a top priority for most parents.