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Asian stocks slump as China rate cut disappoints investors

(Agencies)
Updated: 2008-12-23 15:32

Asian stocks slumped in thin trade Tuesday after an interest rate cut in China disappointed investors and Wall Street finished lower.

There was little cheer before the year-end holidays, as energy firms tumbled along with oil prices and carmakers fell on news Japan's Toyota Motor Corp expects to post its first operating loss in 70 years.

Related readings:  Chinese shares open slightly higher on interest rates cut  Interest rates cut again to spur growth  Japan central bank cuts interest rate to 0.1%  Asian markets gain ahead of Japan rate decision

South Korea's Kospi fell 3.3 percent to 1,140.41, Australia's benchmark lost 1.6 percent and Taiwan's key index retreated 3.4 percent. Japan's market was closed for a national holiday.

Hong Kong's Hang Seng Index dropped 2.9 percent to 14,201.43, while Shanghai's main index shed 3.5 percent. Both markets came under pressure after China's central bank said Tuesday its benchmark one-year lending rate will fall by 0.27 percentage point to 2.25 percent.

It was the fifth cut in four months, part of the government's recent efforts to revive economic growth amid the global downturn. But some investors had anticipated a cut of 0.5 percentage point, analysts said.

After rallying off last month's lows, the markets were succumbing to selling as many investors moved to close out their positions before the end of one of the most tumultuous years in decades.

"There's a lot of profit-taking before the holiday," said Ben Kwong Man Bun, the chief operating officer at KGI Securities in Hong Kong. "People believe the upside will be very limited for now. The global economy is facing a huge problem."

The lurch downward came after Wall Street fell overnight.

Investors spooked by the dismal news from Toyota and US drugstore operator Walgreen Co sent the Dow lower by 59.34 points, or 0.69 percent, to 8,519.77 _ its fourth straight daily loss. The broader Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63.

US market futures were down slightly, suggesting Wall Street would open lower.

Chinese financials were weaker on the authority's rate cut, as leading lender ICBC fell 2.1 percent and insurer Ping An lost 5.2 percent. South Korean car companies also saw heavy selling, with Hyundai Motor Co plummeting 8.6 percent.

Sinking prices for raw materials pulled down resource firms like Chinese oil producer CNOOC, off 4.4 percent in Hong Kong trade, and Australia mining giant BHP Billiton Ltd, down 5.4 percent.

Crude dropped further in Asian trade, with light, sweet crude for February delivery sliding 27 cents to $39.64 a barrel on the New York Mercantile Exchange.

In currencies, the dollar was slightly higher at 90.24 yen, up from 90.13 yen late Monday in New York. The euro edged up to $1.3977 from $1.3951 on Monday.