Asian markets decline; profit taking on Bank of China warning (MarketWatch) (24-11-2009)

HONG KONG (MarketWatch) -- Asian markets were mostly down Tuesday, led by China as investors booked profits after the country's banking regulator warned banks about their capital positions, raising fears that lenders may have to sell shares to raise capital.

The Shanghai Composite fell 3.5%, after rising in 13 of the 16 sessions in November prior to Tuesday. The Shenzhen Composite Index gave up 4.3%. The fall in Shanghai triggered wider losses in Hong Kong, where the benchmark Hang Seng Index dropped 1.5%.

Chinese banking stocks dropped in Hong Kong and Shanghai after the mainland banking regulator warned banks to meet industry capital requirements or face sanctions.

Shares of Bank of China lost 4% and China Construction Bank shed 3.4% in Hong Kong; in Shanghai, they fell 2.3% and 2.9%, respectively.

Elsewhere, Japan's Nikkei 225 Average fell 1% to 9401.58, Australia's S&P/ASX 200 gave up 0.7%, and South Korea's Kospi shed 0.8%, while Taiwan's Taiex rose 0.4%. In afternoon trading, India's Sensex declined 0.5% and Singapore's Straits Times Index fell 0.3%.

Earlier in the day, Japanese Finance Minister Hirohisa Fujii said deflation was primarily a concern for monetary policy, rather than fiscal policy. Also, data due later in the week was forecast to show Japan's core consumer-price index fell 2.2% year-to-year in October, after a 2.3% decline the previous month.

Financial shares were hit hard, with Takefuji ending 6.8% lower after Moody's downgraded its ratings on Friday, while fellow consumer-finance company Aiful fell 4.8%. Persistent worries about capital-raising hurt banks, with Mizuho Financial Group sliding 2.5% and Sumitomo Mitsui Financial Group shedding 4.4%.

The South Korean market declined on concerns about expensive valuations after strong gains. Lee Jae-mahn at Tong Yang Securities said "investors continue to stay on the sidelines amid a tug of war between ample liquidity and sharply reduced systemic risk, and concerns local firms' earnings and the Kospi might have peaked in the third quarter."

Source: MarketWatch