Asian stocks fall as China, US measures weigh
Wednesday, 27 January 2010
HONG KONG, Jan 26 (Reuters): Asian stocks fell Tuesday as fears of further clampdowns on lending in China and a US plan to freeze domestic spending sparked worries about the outlook for global growth.
Highlighting fears that a global recovery may be sputtering, South Korea reported weaker-than-expected growth in the fourth quarter, which cast douts about consumption in Asia's fourth-largest economy. Stocks in Seoul fell nearly two per cent.
"The budget freeze in the United States, along with the latest moves by China, will hurt the South Korean economy, if not cripple all the recent recovery momentum," said Park Sang-Hyun, chief economist at Hi Investment & Securities in Seeoul.
"The global economy still needs government spending to stay on the recovery path."
The MSCI index of Asia Pacific stocks outside Japan fell 1.2 per cent, with banks and technology shares leading the decline as they have for much of the past week after the White House proposed new restrictions which would hit profits at big banks.
The Nikkei fell one per cent as investors grew cautius heading into Japan's earnings seen and awaited key economic indicators such as US GDP later in the week.
US President Barack Obama, under pressure from deficit hawks, will seek a three-year freeze on domestic spending in his 2011 budget that would save $250 billion by 2020, administration officials said Monday.
While financial markets would welcome any attempts by the US to gets its longer-term debt under control, some in Asia were concerned a spending freeze now could rob the US economy of its newfound growth as its struggles to throw off recession.
Sentiment was further eroded after banking sources said China had implemented its latest rise in bank reserve ratios to curb excessive lending. Sources said several Chinese banks would see their extra reserve ratios take effect today (Tuesday).
The central bank told some banks last week to increase their reserve ratios by 0.5 percentage point. No new banks have been slapped with fresh higher reserve requirement ratios, the sources said.
Highlighting fears that a global recovery may be sputtering, South Korea reported weaker-than-expected growth in the fourth quarter, which cast douts about consumption in Asia's fourth-largest economy. Stocks in Seoul fell nearly two per cent.
"The budget freeze in the United States, along with the latest moves by China, will hurt the South Korean economy, if not cripple all the recent recovery momentum," said Park Sang-Hyun, chief economist at Hi Investment & Securities in Seeoul.
"The global economy still needs government spending to stay on the recovery path."
The MSCI index of Asia Pacific stocks outside Japan fell 1.2 per cent, with banks and technology shares leading the decline as they have for much of the past week after the White House proposed new restrictions which would hit profits at big banks.
The Nikkei fell one per cent as investors grew cautius heading into Japan's earnings seen and awaited key economic indicators such as US GDP later in the week.
US President Barack Obama, under pressure from deficit hawks, will seek a three-year freeze on domestic spending in his 2011 budget that would save $250 billion by 2020, administration officials said Monday.
While financial markets would welcome any attempts by the US to gets its longer-term debt under control, some in Asia were concerned a spending freeze now could rob the US economy of its newfound growth as its struggles to throw off recession.
Sentiment was further eroded after banking sources said China had implemented its latest rise in bank reserve ratios to curb excessive lending. Sources said several Chinese banks would see their extra reserve ratios take effect today (Tuesday).
The central bank told some banks last week to increase their reserve ratios by 0.5 percentage point. No new banks have been slapped with fresh higher reserve requirement ratios, the sources said.