Nikkei Slides on Slashed Credit Rating, China Steps Up Property Taxes


In Asia Friday the Nikkei 225 Index sank 1.1% to 10,360 and Hong Kong's Hang Seng Index slid 0.7% to 23,617. In China the Shanghai Composite Index inched up 0.1% to close at 2,753.

Shares tumbled in Tokyo after Standard & Poor's slashed Japan's credit rating from AA to AA-. The island nation's debt situation is not good, with government debt ratios continuing to rise. S&P says it "expects Japan's fiscal deficits to remain high in the next few years, which will further reduce the government's already weak fiscal flexibility." The ratings agency also sited worries about deflation, while also confirming that the country's long-term rating is stable. Japan now holds the same rating as China.

On a brighter note, Japan's exports increased by 13% in December, as compared with numbers for a year ago, which could signal steps in the right direction. But those higher numbers could just be a reaction to one-off factors, say some analysts.

Advantest was among the worst hit, plunging 7.4%. The memory chip testing equipment maker suffered after Goldman cut its share-price estimate by 60 yen.

Financial companies tanked with Mizuho Trust diving 3.6%, Mitsubishi UFJ forfeiting 2.7% and Nomura Holdings off 1.9%.

While exports may be the key to Japan's recovery, electronics exporters weren't much help today. Canon nosedived 3.1%, OKI Electric sank 2.9%, Olympus and Sharp both lost 1.1% and Panasonic slumped 1%. Sony inched down 0.2% and competing game console maker Nintendo gave up 1.5%.

On Hong Kong's big board Cnooc was the worst performer. Shares plummeted 7% after the company said it was forecasting far slower production growth for 2011. Other oil companies followed suit with PetroChina losing 0.9% and Sinopec down 0.7%.

The Hang Seng's few gainers included Li & Fung, distributor of clothes and toys to the likes of Abercrombie and Walmart, which climbed 1.5% and Tencent, China's coolest new instant messaging company, which advanced 1.8%.

Property-Buying Restrictions Bring Down Real Estate Firms

But there were more big losses for Hong Kong's real estate firms with Hang Lung down 3%, Cheung Kong down 2.2% and New World Development declining 1.5%. Worries over ever-more stringent property purchasing restrictions are taking their toll, compounded with predictions that China is heading for its own sub-prime mortgage-type disaster. Shares in Glorious Property, specializing in new office buildings and residential properties, tumbled 4.1%. The company's portfolio of developments includes Royal Lakefront, a European-style residential project complete with cupolas and manicured gardens, selling a European lifestyle in Shanghai.

In China, today's the day when complicated new property tax trials go into effect, sending shares in Poly Real Estate down 1.2%, China Vanke down 0.5%. Gemdale declined 0.3%. For now the new tax is restricted to Shanghai and Chongqing -- but if it's expanded, it could take a further bite out of China's property empires.