Asian shares tumble; property curbs spark China selloff

A selloff in Chinese equities dragged Asian shares down sharply on Monday, as worries about Beijing tightening its grip on the property sector compounded weak sentiment already dampened by a patchy global growth outlook.

European markets are seen falling, with financial spread-betters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open down as much as 0.4 per cent.

A 0.5 per cent fall in US stock futures pointed to a weak Wall Street start.

MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.7 per cent to a nine-week low.

Shanghai stocks were the worst performer with a 2.9 per cent slide and Hong Kong stocks slumped 1.5 per cent.

The CSI300 of the top Shanghai and Shenzhen A-share listings was down 3.8 per cent, set for its worst daily showing since January 2011. (Read story)

"We are in a high risk zone now. I wouldn't advise clients to add risk in the near term, since property is a huge sector. This will have a ripple effect on other sectors in the economy," said Hong Hao, chief equity strategist at Bank of Communication International Securities.

Chinese shares were hit after Beijing on Friday said it could increase required down payments and loan rates for buyers of second homes in cities where prices are rising too quickly, the central government's latest move to contain housing costs which came ahead of the country's annual parliamentary meetings.

Data also showed growth in China's increasingly important services sector expanded at its slowest pace in five months in February, reinforcing the view that the recovery in the world's second-largest economy remains modest. China's factory growth also cooled to multi-month lows in February.

"The PMI data were worse than expected and the latest move on the property sector deepens uncertainty about how funds would flow within the Chinese economy," said Chiyuki Shiraiwa, economist at SMBC Nikko Securities in Tokyo.

"I believe the economy remains on a recovery trend and bank loans were strong in January. But we have yet to see new projects take place and the effect of the latest regulation needs to be monitored," she said.

Cross-yen and the dollar-yen were taking their cues from the sell-off in Chinese equities, lifting the yen broadly.

Resources-reliant Australian shares also shed 1.5 per cent after the index hit a 54-month high last Thursday. The market has since pulled back on fresh concerns over sluggish growth in China and budget spending cuts in the United States.

Japan's Nikkei stock average bucked the trend to be the sole gainer in the region, rising 0.4 per cent and scaling a fresh 53-month high, supported by exporters after data showed surprisingly strong US manufacturing and consumer sentiment.

South Korea's manufacturing activity expanded in February at the strongest rate in nine months as new export orders rose by the sharpest pace since the second half of 2011, a private survey showed on Monday.

A private gauge of Australian inflation showed price pressures moderated in February, helped by falls in travel and clothing costs, indicating there was still scope for cuts in interest rates if needed to support the economy.

Dollar firms

The dollar remained near Friday's six-month high against a basket of currencies.

It eased against the yen, down 0.2 per cent to 93.38, as markets brushed aside comments from the government's nominee for next central bank governor, Haruhiko Kuroda, who said the BOJ must ease monetary policy further both by expanding the size of asset purchases and targeting a wider type of assets in order to achieve its 2 per cent inflation target.

But Japanese government bonds cheered Kuroda's remarks, which reinforced market expectations for bolder BOJ policies in coming months. JGB futures hit a record above 145.26.

Despite the wide-ranging US spending cuts that automatically kicked in on Friday, the US currency was bolstered by the robust US economic figures.

Underlying the dollar's strength, data on Friday showed currency speculators increased their bets in favor of the US dollar in the latest week.

Evidence of Europe's problems, with Spain also at risk of needing a state bailout, came on Friday as data showed that Germany and Ireland were the only two euro zone members with factory output growth last month. Joblessness in the euro zone rose to an all-time high.

"The US is not looking particularly good, but in comparison (to the euro zone) it's looking somewhat better," said Rob Ryan, strategist for RBS in Singapore.

The euro steadied around $1.3018, after slipping to a low of $1.2966 on Friday, its lowest in nearly 3 months.

Just hours after across-the-board spending cuts officially took effect, US President Barack Obama pressed Congress on Saturday to work with him on a compromise to halt a fiscal crisis that threatens both the economy and his broader domestic policy agenda.

Concerns about the negative economic impact from the US spending cuts weighed on US crude, which fell 0.2 per cent to $90.46 a barrel. Brent was down 0.1 per cent at $110.32.

But robust US economic data dented bullion's safe-haven appeal, capping gains in spot gold which inched up 0.2 per cent to $1,577.54 an ounce.

Copyright @ Thomson Reuters 2013