ASIA MARKETS: Hong Kong, China Markets Weighed By Bank Shares

By Daniel Inman

Stocks in Shanghai and Hong Kong led Asia's losses Wednesday as liberalization pressure weighed on Chinese banks, while a stronger yen weighed on Japanese stocks.

The Shanghai Composite lost 1.1% and Hong Kong's Hang Seng Index lost 1.2% after news that China's four state-owned banks and a former state policy bank will issue a total of 19 billion yuan ($3.1 billion) worth of negotiable certificates of deposit -- another step in China's move toward liberalized interest rates, raising concerns about short-term pressure on bank profits.

Unlike ordinary bank deposits, the interest rate on the new certificates requires the banks to negotiate the cost of capital between themselves.

Agricultural Bank of China Ltd. lost 1.5% in Shanghai, while China Construction Bank Corp. was 1.4% lower.

Also in Hong Kong, HSBC Holdings PLC (HSBC) , the single largest constituent on the Hang Seng Index, fell 0.7% after the bank said it agreed to sell its 8% stake in Bank of Shanghai to Spain's Banco Santander S.A. . The bank didn't say how much it was selling the stake for but it valued the holding at $468 million at Sept. 30.

More broadly, the region followed the U.S. lower, after stocks on the Wall Street fell overnight as investors sold to cash in some of the strong gains for the year and continued to worry about the potential impact of a reduced Federal Reserve stimulus.

Speculation over when the Fed will start to roll back its bond-buying program has been a persistent theme in Asia since the early summer, when it sparked a series of selloffs in the region. Recent employment data from the U.S. have been strong, which has raised expectations that the Fed could start to withdraw its stimulus as early as in its December policy meeting next week, giving trading a general air of caution.

This caution could be seen in the dollar's movement against the yen, which pulled back overnight, after spending much of Tuesday with striking distance of challenging its year high. The dollar (USDJPY) lost a total of 0.4% against its Japanese counterpart overnight and was last trading at Yen102.63, compared with Yen102.84 late Tuesday in New York.

The yen's push back against the dollar weighed on Japanese stocks, with the Nikkei last down 1.2%.

South Korea's Kospi was down 0.2%.

In Australia, the S&P ASX 200 fell 0.4%, the index's fifth consecutive decline, as investors continued to worry about the impact of a flurry of initial public offerings hitting the market before the end of the year.

Shares in QBE Insurance Group (QBIEY) gained 3.5% on Wednesday, as J.P. Morgan upgraded the company to neutral after falling a total of 32% on Monday and Tuesday. The insurer's surprise profit warning earlier this week had hit broader sentiment in Sydney.

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