ASIA MARKETS: Asia Stocks Trip Over Weak China Data

By V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) -- Most Asian markets fell Tuesday after data showing Chinese manufacturing activity expanded at a slower rate in April, with Shanghai-listed stocks hit particularly hard, although Australian shares climbed on the back of banks and energy producers.

"Investor outlook on the Chinese economy appears delicately balanced," said CMC Markets chief market analyst Ric Spooner.

Spooner said there were worries that the Chinese economy may be underperforming the official numbers, in addition to "concerns that the economy has the potential to weaken further as authorities wrestle with the contradictory imperatives of maintaining growth."

The Shanghai Composite Index was the region's worst performing stock benchmark, dropping 2.6% for its worst daily loss in nearly a month. The decline came after a preliminary version of HSBC's manufacturing Purchasing Managers' Index slipped to a two-month low of 50.5 in April, compared with a final reading of 51.6 in March.

Hong Kong's Hang Seng Index gave up 1.1%, Taiwan's Taiex shed 0.4% and South Korea's Kospi lost 0.4%.

Japan's Nikkei Stock Average slipped 0.3% after struggling to rise earlier in the day.

Australia's S&P/ASX 200 was one major exception, rising 1% at 5,016.20, even though a number of Sydney-listed miners that count China as a major customer for the commodities they produce declined.

The broad losses in Asia came despite gains for U.S. stocks overnight.

HSBC's chief China economist Qu Hongbin said a drop in new export orders signaled weak external demand, while overall sluggish demand conditions have also begun to weigh on employment. Still, Qu remained optimistic about a policy response to support the economy.

"Beijing is expected to respond strongly to sustain the economic recovery by increasing efforts to boost domestic investment and consumption in the coming months," he said.

Shares of property- and construction-related firms took a tumble on Chinese bourses after the HSBC PMI data release, with Anhui Conch Cement Co. (AHCHY) shedding 5.9%, real-estate major Gemdale Corp. skidding 4.9%, and Chongqing Iron & Steel Co. falling 4.8%.

Property giant China Vanke Co. lost 3.5% in Shenzhen trading despite posting a 16% rise in first-quarter net profit.

Commodity producers suffered selling in Hong Kong, where shares of Aluminum Corp. of China Ltd. (ACH) lost 1.7% and PetroChina Co. (PTR) fell 1.2%, while ports operator Cosco Pacific Ltd. (CSPKY) dropped 3%.

Heavyweight stock China Mobile Ltd. (CHL) retreated 0.9% after reporting its net profit barely grew in the first quarter amid stiff competition.

The gains in Sydney were aided by the energy sector, with major oil producer Woodside Petroleum Ltd. (WOPEY) jumping 9.7% after announcing a special dividend. Among its sector peers, shares of Santos Ltd. (SSLTY) climbed 3%, while Linc Energy Ltd. (LNCGY) added 5.1%.

Financials were also higher in Sydney following a positive lead from Wall Street, helped by further buying in high-dividend stocks. Australia & New Zealand Banking Group (ANZBY) added 2.4%, and Westpac Banking Corp. (WBK) gained 1.3%.

The big miners dropped, however, in reaction to the Chinese data. Shares of BHP Billiton Ltd. (BHP) lost 1.1%, Rio Tinto Ltd. (RIO) fell 2.3% and Fortescue Metals Group Ltd. (FSUMY) dropped 1.3%.

Newcrest Mining Ltd. (NCMGY) declined 3.3% after saying it's reviewing all business activities in the wake of the drop in gold prices.

Shares of Virgin Australia Holdings Ltd. (VBHLF) climbed 4.6% after local regulators approved the airline's plan to buy a majority stake in low-cost carrier Tiger Airways Australia.

Over in Tokyo, banks gave up some of their strong recent gains, with Mitsubishi UFJ Financial Group Inc. (MTU) losing 1.5% and Mizuho Financial Group Inc. (MFG) shedding 1.8%.

Fuji Heavy Industries Ltd. (FUJHF), the maker of Subaru vehicles, rose 0.5% after the Nikkei newspaper said it plans to invest 30 billion yen ($302.1 million) (USDJPY) for expansion in the U.S.

ANA Holdings Inc. (ALNPF) added 1% after the Nikkei newspaper reported that the parent company of All Nippon Airways Co. was likely to report a 10% increase in annual group operating profit.

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