Singapore: Asian stocks retreated from 22-month highs and higher-yielding currencies fell as investors booked profits after risky assets ran up in recent sessions on the back of good economic data.
The dollar and the yen gained as falls in equity markets led investors to cut positions in riskier currencies, while the euro fell on concerns about how Greece will service its debt.
The yen also surged as caution about a possible revaluation by China led yen sellers to close short positions ahead of the weekend. The Australian dollar was hardest hit by the yen position closing.
Stock markets could be on the verge of a correction after a strong run-up, as investors take some profits and shift funds into safer havens.
While valuations are not expensive, investors are caught between an overheating Chinese economy that may prompt stricter interventionist measures and the US economy which still appears fragile, Alvin Chong, head of research at Sun Hun Kai Financial, said.
“In this environment investors are not willing to take on more risks,” Chong said.
The MSCI index of Asia-Pacific stocks outside Japan fell about 0.9%. The index is still up more than 4% so far this year.
Japan’s Nikkei average lost 1.5% to close at its lowest in nearly three weeks, with sentiment hit after Google Inc’s results did not live up to high expectations and as the stronger yen set off profit-taking.
Google posted a 23% jump in quarterly revenue on a rebound in Web advertising, but its stock fell as the company disappointed some investors accustomed to blowout results.
“There have been really high expectations for corporate results and so this increases the chances for disappointment,” said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
“But we’re not in a situation where the market will be heavily sold off as a result, since the global economy isn’t worsening at this point.”
Shares in Hong Kong and Shanghai fell more than a percent, weighed down by Beijing’s latest move to ease fast-rising real estate prices.
China’s banking regulator pledged to firmly enforce rules aimed at cooling the real estate sector, a day after the government raised mortgage rates and downpayment requirements in its most aggressive move over the past half a year.
Analysts said the government could impose a property tax on a trial basis if these measures failed.
“Sentiment is weak after China stepped up efforts to cool down the overheating property market,” said Ben Kwong, chief operating officer at KGI Asia in Hong Kong. “Recent economic data pointed to relatively high growth and that may call for further tightening measures.”
Developers were the top losers, with China Overseas Land dropping 5% to near two-month lows. Top lender Industrial and Commercial Bank of China also shed 2%.
Chinese drugmakers, however, bucked the downtrend, with Wuyi Pharma jumping about 12%, spurred by China’s efforts to improve healthcare, including lifting spending on the sector.
Taiwan stocks ended down 0.7%, led by losses in Hon Hai Precision after its group company Foxconn’s profit missed forecasts, while concerns over further China tightening after strong first-quarter growth also weighed.
Thailand stocks slumped more than 3%, hitting a one-month low, as last weekend’s deadly political clashes prompted more foreign selling when the market reopened after a three-day holiday.
Australian shares slipped 0.4%, as investors paused after riskier assets ran up recently on the back of good US economic data and strong corporate results.
Shares of Macarthur Coal Ltd, the subject of a bidding war, surged after it agreed to engage in talks with US miner Peabody Energy on its raised $3.8 billion takeover offer.
South Korean shares ended half a percent lower led by falls in exporters and airlines, but retail issues’ gains lent the market support.
Shares in India and Singapore lost less than half a percent.
Gold eased, pressured by dollar strength, though underlying demand for the metal as a portfolio diversifier supported prices.
Oil prices fell as doubts over US crude demand re-emerged and the dollar strengthened, making imports more expensive for emerging economies where consumption is surging.