China, US concerns pull down Asian stocks

China, US concerns pull down Asian stocks

Hong Kong: Asian stocks slumped on Tuesday as fears of further clampdowns on lending in China and a US plan to freeze domestic spending sparked worries about global growth.

The yen hit a nine-month high against the euro, after a Japanese finance ministry official pledged fiscal discipline in the wake of ratings agency S&P downgrading its outlook on Japan’s sovereign rating.

Japan’s Nikkei stock average fell 1.8% to a five-week closing low, with exporters hurt as the yen rose broadly after China implemented a previously ordered increase in reserve requirements for some banks.

China’s move to curb lending and head off inflation has investors worried that the global economy may not be ready for less stimuli.

“The China news made investors worry that hot money might shrink, and that is likely prompting them to lock in profits or close positions," said Mitsuo Shimizu, deputy general manager, Cosmo Securities.

The MSCI index of Asia Pacific stocks outside Japan fell about 2%, with banks and technology shares leading the decline after the US proposed new restrictions that would hit profits at big banks.

US President Barack Obama’s move in his 2011 budget to seek a three-year freeze on domestic spending to save $250 billion (Rs11.5 trillion) by 2020 has added pressure in Asian stocks.

Hong Kong shares fell 2.4% to their lowest closing level in more than four months, after a profit warning from cellphone maker Foxconn International Holdings Ltd stoked fears over corporate earnings in the tech sector, while China’s reserves move weighed on banks.