HONG KONG (AFP) – China led a slump in Asian markets Tuesday, with Shanghai registering one of its biggest per centage falls of the year and banks among the biggest losers there.
Dealers said a recent run-up following a surprise Chinese interest rate cut had created room for a market correction.
Shanghai dropped 3.03 per cent, or 94.84 points, to finish at 3,032.61. The Shenzhen Composite Index, which tracks stocks on China’s second exchange, fell 1.39 per cent, or 19.68 points, to 1,392.62.
Hong Kong ended down 0.32 per cent or 74.88 points at 23,333.69. Sydney dropped 61.1 points, or 1.12 per cent, to close at 5,380.9, and Seoul slipped 0.21, or 4.10 points to end at 1,939.02.
Tokyo was closed for a public holiday.
“The (Shanghai) market climbed too fast in such a short time after the November interest rate cut, which has caused some structural problems in the market,” Shenyin & Wanguo Securities analyst Gui Haoming told AFP.
The market had jumped more than 20 per cent since the cut to interest rates last month – rising above the 3,000 mark on December 16 for the first time in three and a half years.
Industrial and Commercial Bank of China lost 4.88 per cent to 4.48 yuan while China Construction Bank fell 5.01 per cent to 6.26 yuan. The slide in Asia came despite a positive lead Monday from Wall Street, which remained buoyed by a Federal Reserve meeting last week. There were also high hopes of more good news from a heavy day of economic data releases Tuesday. Last Wednesday the Fed kept interest rates low and left in place expectations that it may wait until mid-2015 before raising them.
The Dow Jones Industrial Average and broad-based S&P 500 hit new highs late Monday. The Dow jumped 154.64 (0.87 per cent) to 17,959.44, almost a point above the previous record.
The S&P 500 advanced 7.89 points (0.38 per cent) to 2,078.54, about three points above the previous high on December 5.
The tech-rich Nasdaq Composite Index rose 0.34 per cent.
“Money is flowing to the US right now because it’s definitely in the healthiest position,” Aaron Jett, vice president of global equity research at Bel Air Investment Advisors, told Dow Jones Newswires.
Investors are looking to the release on Tuesday of US economic reports, including the third estimate of third-quarter gross domestic product and durable goods orders for November. Economists surveyed by the Wall Street Journal expect the agency to say the US economy grew at a seasonally adjusted 4.3 per cent in the July-September quarter, up from its previous estimate of 3.9 per cent.
Gold was at $1,181.80 an ounce, compared to $1,198.02 late Monday. In other markets, Manila rose 0.66 per cent, or 47.05 points, to 7,186.32. Victorias Milling Company Inc. gained 4.22 per cent to 4.69 pesos.