HONG KONG (MarketWatch) — Asian stocks fell Friday after the Federal Reserve’s plans to gradually wind down its bond purchases led to heavy losses on Wall Street, but Chinese shares recovered from their sharp initial declines as Shanghai interbank rates reportedly came off their highs.
Both benchmarks had dropped more than 2% in early trading, but pared those losses on reports of a sharp fall in the Shanghai interbank money-market rates from the record highs they touched the previous day.
Shanghai Composite and Hang Seng Index
“With spiking rates likely an intentional move by the Chinese government, it’s probably not a sign of an emerging credit crisis, but rather responsible economic management. The main concern with China continues to be slowing economic growth,” said Rivkin Securities global analyst Tim Radford.
Elsewhere in the region, Japan’s Nikkei Stock Average JP:NIK -0.72% fell 0.9%, Australia’s S&P/ASX 200 AU:XJO -0.70% gave up 0.3%, and South Korea’s Kospi KR:SEU -1.98% dropped 1.6%, with each of them also coming off the day’s lows.
The drop in regional stocks came as the S&P 500 SPX -2.50% suffered its worst drop since November 2011 on Thursday, adding to late Wednesday losses after the Fed signaled it may soon downsize bond purchases under its quantitative-easing program.
Asia stocks drop hard but then move off their initial lows.
For Asian equities, the drop was an extension of the steep losses they suffered Thursday on a combination of worries, including fears related to downbeat manufacturing data from China and a sharp spike in interbank money-market rates in Shanghai.
“In combination, these factors mean that markets are bracing for the day that they no longer have steroid injections to keep them going. Instead, fundamentals will become important to sustain gains in risk assets,” said Crédit Agricole’s Asia head of global markets research Mitul Kotecha.
In Hong Kong, shares of China Construction Bank Corp. HK:939 +0.19% rose 0.6% and Industrial & Commercial Bank of China Ltd. IDCBY -5.53% HK:1398 -0.44% added 0.2%, with both recovering from early losses.
In Tokyo, shares of brewer Kirin Holdings Co. JP:5406 -3.10% KBSTY -5.33% slumped 8.2%, Hino Motors Ltd. JP:7205 -5.95% HINOY -3.95% shed 6.2%, and real-estate major Mitsui Fudosan Co. JP:8801 -4.56% MTSFF +4.05% gave up 4.5% to rank among the big decliners.
The U.S. dollar USDJPY -.00% was fetching ¥97.09, after trading around ¥97 when the Tokyo stock market closed Thursday. But the yen was still weaker than the ¥98 level it saw in European and U.S. trading.
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The resource sector suffered further deep losses.
In Sydney, gold miner Newcrest Mining Ltd. AU:NCM -5.12% NCMGF -8.29% traded down 4.9%, Karoon Gas Australia Ltd. AU:KAR -0.77% KRNGF -12.43% lost 0.5%, and uranium producer Paladin Energy Ltd. AU:PDN -1.04% PALAF -3.74% gave up 1%.
In Tokyo, energy producer Inpex Corp. JP:1605 -1.92% IPXHF -4.31% lost 2%, and steel maker JFE Holdings Inc. JP:5411 -4.79% JFEEF -5.91% sank 4.9%, and in Seoul, Korea Zinc Co. KR:010130 -4.09% fell 2.9%.