ASIA MARKETS: Asian Shares Mostly Lower On China Concerns

By Daniel Inman

Asian stocks were mostly lower Thursday, as a strong initial economic indicator for China failed to offset pessimism over its economy.

The initial October reading for China's manufacturing activity came out at 50.9, compared to a final reading of 50.2 in September. The score was a seven-month high, above the 50 mark that separates expansion and contraction in factory activity.

The preliminary reading was among the first economic data on the region's largest economy in the third quarter, coming less than a week after figures showed that Chinese growth picked up from a dip in the second quarter.

HSBC's flash PMI measure of manufacturing has led to some sharp market moves this year, as it pointed to a slowdown in factory activity earlier in the summer before showing signs of improvement in recent months.

Australia's S&P/ASX 200 added 0.5%, South Korea's Kospi shed some of its earlier weakness and traded flat.

Thursday's upbeat reading, however, did little to offset fears over the Chinese economy, as China's interbank lending rate moved higher for a second day, reviving fears of a liquidity crunch in June. In addition, data showing a further rise in house prices earlier in the week increased concerns that Beijing could step in to cool down the market.

 
   Hong Kong's Hang Seng index   dropped 0.9% and the Shanghai Composite  lost 0.2%. 
 

Chinese banks recorded substantial losses in Hong Kong, with China Construction Bank (CICHY) down 1.5%, and Industrial & Commercial Bank of China (IDCBY) down 1.3%

In currency markets, the Australian dollar (AUDUSD) picked up slightly after the data were released, last trading at 96.49 U.S. cents, compared with 96.21 U.S. cents late Wednesday in New York.

The yen (USDJPY) remained strong and was last trading at Yen97.21 to the dollar, which weighed on Japanese stocks. The Nikkei Average fell 0.6%.

The dollar trading below Yen98 put some pressure on exporters in Tokyo: Kyocera Corp. (KYO) lost 1.5%, and Toyota Motor Corp. (TM) was 1% lower.

There was also some weakness among companies that produce industrial machinery in Japan after Caterpillar shares (CAT) plunged 6.1% overnight as the firm cut its full-year earnings forecast. This had a knock-on effect on its peers in Japan, where Hitachi Construction Machinery (HTCMF) lost 2.7%, and Komatsu (KMTUF) also dropped 3%.

Also in Japan, Hitachi (HIT) jumped 7.7% after the company more than doubled its net profit outlook for the fiscal half-year ended Sept. 30, due to strength in areas such as electric-power systems.

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