Stocks closed lower in Asia Thursday, as investors speculated that China might tighten the reins on the financial stimulus it has pumped into the economic system. An announcement that the Chinese economy grew 8.9 percent last quarter ignited concerns that inflation might follow such swift expansion. The Shanghai Composite Index fell 0.6 percent to 3,051, Hong Kong's Hang Seng ended the day at 22,211 losing 0.5 percent and Japan's Nikkei Index slid 0.6 percent to close at 10,267.
The possibility of the Chinese government tightening up its monetary policy sent shivers across the South China Sea to Hong Kong where stocks slid for a second day. Clothing company Esprit Holdings (ESHDY) declined 2.6 percent after announcing an 8 percent drop in sales for the first quarter. Li & Fung Ltd. (LFUGY) fared even worse falling 3.4 percent despite its massive contracts to supply clothes and toys to Wal-Mart and Target.
Cathay Pacific Airways Ltd. (CPCAY) slumped 2.8 percent and Datang International Power (DIPGF) lost 2.6 percent on the Hong Kong exchange as well, after posting lower than expected income.
In Japan, financial companies took a dive with Mitsubishi UFJ Financial Group Inc. (MTU), which has lent money to floundering Japan Airlines, sank 3.1 percent and Sumitomo Mitsui Financial Group Inc. (SMFJY) fell 2.7 percent. Brokerage company Nomura Holdings Inc. (NMR), lost 2.9 percent.
Japanese shipping companies lost value with Nippon Yusen K.K. (NYUKF) plunging 3 percent and Mitsui O.S.K. (MSLOY) losing 2.4 percent and even giant mobile-phone operator KDDI Corp. (KDDIY), lost 4 percent today after Citigroup Inc. cut it's rating on the company, making it the biggest loser on the Nikkei.
In China, banking shares suffered as the possibility of a rise in interest rates loomed. China's second-biggest lender, China Construction Bank Corp. (CICHF), slid 1.5 percent, Bank of China Ltd. retreated 1 percent and Industrial & Commercial Bank (BACHY) declined 0.8 percent.
Commodity and raw material company stocks slipped with Jiangxi Copper Co. (JIXAY) dropping 2.5 percent and Maanshan Iron & Steel Co. (MAANF) losing 1.9 percent. Building-related companies were also in the red; building contractor State Construction, declined 1.7 percent and China Sinoma International Engineering Co. fell 1.9 percent.
Merrill Lynch and Deutsche Bank AG both cut the ratings on Chinese-listed Datang International Power Generation Co. (DIPGY), which lost 2 percent, and Huaneng Power International Inc. (HNP) sank 1.9 percent.
Today's gainers in Shanghai included refrigerator and air-conditioner manufacturer Hefei Meiling Co., which soared 6.4 percent and beer company Fujian Yanjing Huiquan Brewery Co., which rallied 3.1 percent. Perhaps a tribute to the Chinese raising a glass to their recent economic success.