Hong Kong: Asian stocks fell for a fourth straight session on Friday, driven by expectations of tighter financial regulation ahead of the weekend G-20 meeting and uncertainty about the global economic recovery.
Part of the weakness in Asia was attributable to profit-taking after a powerful rally in risky assets on Monday on the back of China’s decision to unpeg the yuan.
However, differences among Group of 20 leaders ahead of a summit in Toronto over how to secure the economic recovery caused investor concern, particularly with leading indicators reflecting a slowdown ahead.
“The fundamental backdrop has not significantly changed of late, which could mean risk aversion persists as we finish the first half of the year,” Gareth Berry, currency strategist with UBS in Singapore, said in note.
“Risk sentiment could remain unstable as investors may be increasingly worried on growth prospects in the US, which could weigh on demand conditions for commodities and equities in turn.”
Japan’s Nikkei share average led equity market declines in Asia, falling 1.9% to close below its 25-day moving average in what was seen as a negative short-term signal for Japanese stocks.
Fresh signs of weakness in US consumer spending that have raised concerns about the outlook for corporate earnings sparked much of the selling.
“The feeling in the market really isn’t very good right now, and if we don’t get something encouraging out of the G-20 summit we could see more falls next week,” said Noritsugu Hirakawa, a strategist at Okasan Securities.
“With the G-20 summit going on it’s very hard to buy, and the yen’s gains are adding some downward pressure.”
Shares of Mizuho Financial Group hit a seven-month low after sources told Reuters the bank will decide on Friday to sell up to 6 billion new shares in a planned global offering, increasing the total number of shares outstanding by up to 38%.
Index heavyweights such as Fanuc and Canon saw their shares drop more than 4%.
The MSCI index of Asia Pacific shares outside Japan fell about 1.4%, dragged down the most by technology and resource-related sectors.
Australian shares fell 1.5% to a two-week low as concerns over the global economy resurfaced and investors turned edgy over the mining tax.
Mining firms had received a fillip on Thursday from hopes that Australia’s new prime minister Julia Gillard would offer a more conciliatory approach on the 40% super profits tax, but there was little new information on Friday on negotiations.
“The leads from overseas was weak and the market hates the uncertainty over the mining tax. Having said that we certainly did not see a level of panic,” said Benn Potter an analyst at IG Markets.
For 2010, a Reuters survey found Australian shares are expected to post a gain of just under 5% as investors remain jittery about prospects for global growth and haggling about the mining tax weighs on the mining sector.
Shanghai stocks fell more than half a percent, its third drop in a row.
With the imminent mammoth initial public offering by Agricultural Bank of China threatening to further weigh on the market in coming days, some analysts said they did not expect a strong rebound in stock prices any time soon.
However, the Shanghai Composite Index was up 1.6% for the week, its best week for the month as shares clinged on to gains made earlier in the week when China relaxed its grip over the yuan in a landmark move.
Hong Kong stocks edged down 0.2%.
Taiwan stocks fell 1.5%, pulled down by property and construction stocks after the island’s central bank unexpectedly raised interest rates and strengthened oversight of the mortgage market.
South Korean shares fell more than half a percent as renewed concern about the global economy weighed on issues sensitive to economic cycles such as technology and steelmakers, but life insurers such as Samsung Life advanced.
Indian stocks lost 0.9%, while Singapore shares edged up 0.1%.
The yen rose broadly and stayed near a 1-month high against the dollar on short covering and as falls in regional share markets prompted traders to further sell risky currencies such as the Australian dollar.
The euro and Australian dollar fell against the greenback on investor doubts about the strength of a global recovery, and were also dragged lower by their weakness against the yen.
Gold was softer, but analysts expect the precious metal to be buoyed by investors looking for refuge from financial market uncertainty and concerns about currency depreciation.
Crude slipped toward $76 a barrel, mainly depressed by ample supply but underpinned by a Caribbean storm which might move towards the Gulf of Mexico, where oil facilities are clustered and BP continues to fight an oil spill.