SINGAPORE — Asian shares extended their losses Monday, with Australian benchmarks closing at a three-month low as investors caught up on a slump on Wall Street Friday on concern that accelerating inflation in the US will make it difficult for the US Federal Reserve to continue to cut interest rates.
A retreat in base metals and commodities prices and an earnings downgrade by Australia's second-biggest shopping-center group Centro Properties Group added to the downdraft.
'It's very hard to see much green across the marketplace today,' said Lucinda Chan, division direction at Macquarie Equities in Sydney. There's been a 'little bit of profit-taking, a little bit of book-squaring and probably some offshore influence as well,' she said.
The S&P/ASX 200 closed down 3.5 pct at 6,263.5, while the All Ordinaries lost 3.4 pct at 6,331.8.
The Nikkei ended down 1.7 pct at 15,249.79 and the broader Topix was down 1.9 pct at 1,472.70 as financials and metals-related stocks came under pressure.
In Hong Kong, the Hang Seng lost 3.5 pct at 26,596.58, with property and financial stocks leading the decline.
'Higher inflation in the US will reduce the scope for more interest rate cuts. That's why investors are not so happy,' said Francis Lun, general manager at Fulbright Securities in Hong Kong.
Investors are also worried about further tightening in China as the authorities move to rein in inflation, currently running at its highest level in more than 10 years, said Ben Kwong, chief operating officer at KGI Asia. The Chinese economy has grown at an annual rate of more than 11 pct in each of the last two quarters.
The South Korean Kospi ended down 2.9 pct at 1,839.82 and the technology-loaded Kosdaq index closed down 3.2 pct at 702.49. Traders said caution ahead of the presidential elections on Wednesday also weighed. The frontrunner in opinion polls, Lee Myung-Bak, is expected to face an independent probe into his links to a case of financial fraud.
However, the election should have a limited impact 'given that most candidates claim to have pro-business policies,' said Won Jong-Hyuck, analyst at SK Securities.
Housing focus The Dow Jones Industrial Average closed down 1.3 pct on Friday after the Labor Department said the consumer price index rose 0.8 pct in November amid a spike in gasoline prices. The report also found large increases in the cost of clothing, airline tickets and prescription drugs.
The Dow lost 2.1 pct for the week, its worst performance in five weeks. The CPI data came a day after higher-than-expected producer price data and raised concerns about the Fed's ability to move on rates to stimulate a slowing economy.
Goldman Sachs (NYSE:GS) , Bear Stearns (NYSE:BSC) and Morgan Stanley (NYSE:MS) are due to report quarterly earnings this week and investors are expecting more disclosures relating to subprime-related securities.
On the data front, the housing sector will be in focus with housing starts for November due Tuesday. Other key releases include the core personal consumption expenditures price index due Friday. The index is the Fed's favoured inflation reading.
Among individual stocks, Centro closed down 76.1 pct at 1.36 aud after it slashed its earnings forecast for the year to June 2008 due to the higher-than-expected cost of extending and refinancing debt facilities caused by the tightened credit conditions.
Also weighing on the market were sharp falls in base metals and commodities prices amid concern the turmoil in credit and financial markets will erode demand. Copper, aluminium, lead, tin and zinc closed in negative territory on the London Metals Exchange while gold and crude oil prices ended the week lower.
BHP Billiton (NYSE:BHP) , which has made a three-for-one share offer for Rio Tinto, ended down 4 pct to 40.37 aud after the world's largest miner suspended a share buyback program.
Rio retreated 3.9 pct to 131.85 aud after announcing plans to invest 991 mln usd to boost output at its Kestrel Mine in the Bowen Basin in central Queensland.
Base metals miner Zinifex slumped 6.8 pct to 13.09 aud after its subsidiary Zinifex Australia Ltd launched an unsolicited all-cash takeover bid for emerging nickel miner Allegiance Mining NL. (OOTC:AMNLF) Allegiance, which confirmed it is considering the offer, rose 38 pct to 98 Australian cents.
Financial strain In Tokyo, financials were lower, with Mizuho Financial down 5 pct at 533,000 yen, Mitsubishi UFJ Financial down 4.3 pct at 1,028 yen and Sumitomo Mitsui Financial (OOTC:SMFJY) off 3.7 pct at 825,000 yen.
Iron and mining stocks also fell. Nippon Steel fell 3.7 pct to 605 yen and JFE declined 4.6 pct to 5,180 yen.
In Hong Kong, biggest developer in the region, Sun Hung Kai (OOTC:SGKAF) Properties, fell 6.5 pct to 148.90 hkd. The company is investing 2 bln yuan to develop a commercial and residential complex in the booming Chinese city of Suzhou, the South China Morning Post reported Monday.
China Shenhua Energy was down 2 pct at 44.75 hkd. The mainland's biggest coal producer said commercial coal output rose 15.8 pct to 13.2 mln tons in November from a year earlier.
Hong Kong Exchanges & Clearing Ltd fell 3.1 pct to 218.40 hkd. The stock market operator is studying a proposal to change the rules to make more shares in initial public offerings available to retail investors, the Wall Street Journal reported.
Some investors have complained that it is hard to buy IPO shares because the bulk are allotted to strategic investors who are required to hold the stock for a lock-up period of around two years, the newspaper said. Given the limited number of shares that are allowed to float freely, prices usually move up.
Separately, the South China Morning Post reported that Hong Kong Exchanges and Clearing plans to lure more foreign companies to list in Hong Kong. Government officials are set to visit the Middle East in the first quarter of 2008, after a trip to India this month, the newspaper said.
Elsewhere, the Singapore Straits Times fell 3.3 pct to a three-week low of 3,353.56, the Kuala Lumpur Composite Index was down 0.8 pct at 1,391.61 and the Shanghai Composite lost 2.6 pct at 4,876.76.
The Taiwanese Taiex lost 3.5 pct to 7,830.85, the Philippines Composite was down 1.5 pct at 3,486.82, and the Jakarta composite index closed down 2.7 pct at 2,664.92.
Newstex ID: AFX-0013-21711738
source: 19dec2007
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