Shares in Asia tumbled Thursday. In China the Shanghai Composite index plunged 3.6%, ending the day at 3,171, and in Hong Kong, the Hang Seng Index dropped 1.8% to 22,210. In Japan the Nikkei Index lost 0.6% to close at 9,383.
Chinese banks sank lower again Thursday as investors and the Chinese authorities await plans as to how banks will raise capital to support the massive loans they have made this year. In addition, Yin Zhongqing, deputy head of the finance and economic committee announced that the amount banks are predicted to lend in 2010 will fall to $730 billion to $1.2 trillion. That's far lower than the estimated $1.4 trillion loaned in 2009. "A level higher than 8 trillion yuan will pose serious inflationary pressure," he told Reuters. "I think five to eight trillion yuan in new loans next year would reflect the appropriately loose monetary policy."On this news, Chinese-listed shares of Bank of Communications (BKFCF) plunged 4.2%, Industrial & Commercial Bank of China (IDCBY) dropped 2.8% and Bank of China (BACHY) fell 3.5%. Among the smaller banks, China Construction Bank (CICHF) dived 3.4% and China Merchants Bank (CIHHF) plummeted 4.7%.
There was even more bad news for banks in Hong Kong where the long awaited IPO of China Minsheng Banking Corp. flopped on its first day of trading. Shares in the bank tumbled 3.1 percent, making it the first banking IPO in four years to sink on its debut in the territory. Hong Kong-listed shares of major banks also lost value. China Construction Bank (CICHF) dropped 3.6%, Bank of China (BACHY) declined 2.9%, Industrial & Commercial Bank of China (IDCBY) dipped 2.8% and HSBC (HBC), the most heavily weighted stock on the exchanged, fell 1.8%.
The big question is whether the spectacular Asian economic recovery will be sustainable with less liquidity splashing around in the market. In Hong Kong today, retailing shares shed value, hinting that investors may be worrying about a loss of consumer confidence. Clothing manufacturer Li & Fung (LFUGY) lost 2.5%, while luxury property developer Glorious Property lost 3.5%. Henderson Land Development (HLDVF), now famous for selling the world's most expensive apartment, plunged 2%, New World Development (NDVLY) lost 1% and luxury builder Hang Lung Properties (HLPPY) fell 0.7%.
In Japan stocks closed lower as investors saw the value of the yen rise to its highest level in 14 years. Today, the country's currency reached 86.30 yen to the dollar, shrinking the value of overseas sales dramatically. Canon Electronics (CAOEF), which makes about 28% of its sales in the U.S., lost 2.1% and Sony Corp. (SNE) dropped 1.9%. Japanese car companies, which are extremely dependent on overseas sales, were battered. Isuzu Motors (ISUZF) plunged 4.7% and Suzuki Motor (SZKMF) lost 1.4%. Mazda Motor (MZDAF) shed 1.3% and Honda Motor (HMC) fell 1.1%. This week Toyota announced another recall -- this time it's 110,000 Tundra pickup trucks -- and today the carmaker's stock retreated 1.2%. Bad news like this provides more fuel for critics who think the Japanese leaders are asleep at the wheel.
Learn the most important step in structuring an investment portfolio.View Course »