UPDATE: Asian Share Mkts Slide As Commodity, Oil Stks Falter

(Adds information, quotes, updates/adds market levels)

By Rosalind Mathieson and Leslie Shaffer

Of DOW JONES NEWSWIRES

SINGAPORE (Dow Jones)--Asian share markets were well entrenched to the downside Tuesday after Wall Street slid, with commodity and energy stocks bearing the brunt of selling amid renewed concerns about how rapid or durable a global economic recovery might prove.

Japan's Nikkei 225 was down 3.1% with Australia's S&P/ASX 200 off 3.2%, Hong Kong's Hang Seng Index down 3.4%, Singapore's Straits Times Index off 1.9% and South Korea's Kospi Composite 2.7% lower. New Zealand's NZX-50 was down 1.2%.

Risk aversion carved into currencies like the Australian dollar, but helped the safer-haven Japanese yen. U.S. stock futures though were flat in screen trade.

"The declines in share and commodity markets can simply be put down to good, old-fashioned profit taking," said Craig James, chief economist at CommSec. "The rally in commodity prices went too far, too soon. Fund managers are urgently trying to lock in gains."

The declines came after the Dow Jones Industrial Average dropped 2.4% Monday, while oil and metal prices sank.

Fortescue Metals was recently down 7.6% in Sydney with Bluescope Steel off 6.9%, Alumina down 7.6%, Sims Metal down 1.5%, Rio Tinto falling 4.4% and BHP Billiton off 4.1%. Korea's Posco shed 3.9% with NZ Oil & Gas down 3.2% and Pike River Coal off 2.6%, while in Japan, Nippon Steel fell 3.6% and Mitsubishi Corp shed 5.5%.

In Hong Kong, PetroChina shed 3.8%, while its China-listed A-shares dropped 2.2%. Jiangxi Copper's Hong Kong-listed shares dropped 5.3% and its A-shares shed 2.1%.

Barclays Capital said the main reason for the declines was "speculation surrounding the possibility of a slowdown in Chinese import buying of commodities. (We feel) this poses the single biggest downside risk, especially for metal and agricultural prices. There are already some early signals that Chinese demand is beginning to ebb."

August Nymex crude was $1.06 lower on Globex, at $66.44 a barrel, adding to a fall of more than $2.50 in New York. "Speculators are moving from one target to another, seeking quick profits, (but) they will eventually come back to the crude market" as long as liquidity is maintained, said Tokai Tokyo Research Center analyst Katsumi Hosoi.

LME three-month copper fell 5.4% in London and was down $76 in Asia at $4,685 a ton, touching a four-week low, with China's October copper contract down CNY980, or 2.6%, at CNY37,200 a ton.

Spot gold shed $3.75 to $918.85 a troy ounce from New York levels.

Markets were also cautious before a two-day meeting of the Federal Open Market Committee.

"There are a lot of nuances to communicate to the market: The Fed thinks they are more or less done, but aren't about to take away the punch bowl. The potential for misinterpretation and market mishap in the aftermath of this meeting is substantial," said Rabobank International.

A rising yen hurt exporter shares in Tokyo, with Nikon off 5.8% and Advantest down 4.9%.

Financial stocks were sold in Korea, with Shinhan Financial down 3.8%. There were declines also in Australian banks, with Westpac off 3.8%. Hong Kong heavyweight HSBC dropped 3.0% and Singapore's DBS shed 2.4%.

China shares fell on continued liquidity concerns, given the recent resumption of initial public offerings after a nine-month moratorium. The Shanghai Composite Index was down 1.4%.

"The biggest concern is when the government will launch big IPOs and how many large companies will initially be allowed to raise funds from the capital market," said Simon Wang at Guoyuan Securities.

GOME Electrical Appliances Holdings was a standout in Hong Kong, though, jumping 99.0% after sealing a deal with Bain Capital to raise at least HK$3.24 billion.

Taiwan's main index fell 1.9%, with Philippine shares down 2.1%, Malaysian shares off 1.5% and Indonesian shares lower by 3.4%. Shares in Vietnam dropped 4.5% with Thai shares off 3.0%.

In currency trade the U.S. dollar was at Y95.19, from Y95.99 late in New York, with the euro at $1.3838, from $1.3865, and at Y131.78, from Y133.12.

The U.S. dollar was rising against Asian currencies, at MYR3.5495 against the Malaysian ringgit, from MYR3.5380 on Monday, and at KRW1,287.35 against the Korean won, from KRW1,274.50.

Analysts at Calyon said Asian currencies looked vulnerable to an increase in risk aversion. Equity capital "outflows from Asia last week totaled $1.25 billion and the trend appears to have continued this week, pointing to further downside risks to Asian currencies."

U.S. Treasurys were indicated higher in Tokyo, after strong gains in the U.S., with the yield on the 10-year note quoted at 3.68%, from 3.70% in New York.

Still, Kazuaki Oh'e, executive director of debt capital markets at CIBC World Markets in Tokyo, said gains may fade given the hefty auction slate this week, and before the Fed meeting. "This is not such good timing to buy. The first reaction (to expected equity weakness) is to buy, but at some point we'll see some profit-taking. If you're already long, you must be nervous."

Japanese government bond futures were tracking higher, with the lead contract up 0.40 at 137.40 points, its highest level since May 18, with the yield on the 10-year note down 2.5 basis points at 1.43%, its lowest since May 22.

-Dow Jones Newswires; +65-6415-4140; rosalind.mathieson@dowjones.com

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June 22, 2009 23:03 ET (03:03 GMT)


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