Asian markets retreat amid bubble worries
HONG KONG — Asian stocks fell Wednesday amid growing worries the recent rally was creating a bubble, with Shanghai’s market plunging nearly 8 percent as the world’s biggest IPO this year started trading in China. European markets advanced.
China and Hong Kong stocks — among the best performing in recent days — led declines despite two much-ballyhooed trading debuts, including that of China State Construction Engineering Corp. Its initial public offering raised a whopping $7.3 billion. Oil prices fell and the dollar lost ground against the yen.
Asia’s slide came after two weeks of stellar gains as hot money flowed across the region and better-than-expected earnings in the U.S. and elsewhere raised expectations of a stronger recovery in the world economy.
But the surge has also led to concerns higher stock prices are losing touch with the economic realities of still-weak industrial production and even weaker consumer demand in many countries.
“Everyone knows we’ve rallied too fast and too quickly,” said Peter Lai, investment manager at DBS Vickers. “I think people are waiting for excuses to get out of the market because sooner or later there could be a big correction.”
Early in Europe, Britain’s FTSE 100 gained 0.7 percent, Germany’s DAX was up 1.2 percent and France’s CAC-40 rose 1.4 percent.
Contributing to China’s sell-off, analysts said, were concerns government efforts to control huge amounts of bank lending this year might dry up some of the liquidity that’s been driving the run-up. The main Shanghai index dived nearly 8 percent before clawing back some losses, ending down 171.94 points, or 5 percent, at 3,266.43.
Hong Kong’s Hang Seng retreated 489.04, or 2.4 percent, to 20,135.50.
Elsewhere, Japan’s Nikkei 225 stock average closed up 25.98 points, or 0.3 percent, at 10,113.24 during a seesaw session, and South Korea’s Kospi inched down 0.1 percent. Markets in Taiwan, Australia, India and Singapore also lost ground.
In Hong Kong and China this year, markets had soared over 40 percent and 80 percent, respectively, with several recent IPOs only adding to the frenzy for stocks.
On Wednesday, China State Construction Engineering was up nearly 80 percent from its IPO price by midmorning before ending at a mere 56 percent premium in Shanghai. The company, which built the “Water Cube” swimming center for the Beijing Olympics, is the world’s biggest initial public offering since March 2008.
A second IPO, Beijing cement giant BBMG Corp., soared more than 60 percent in its debut in Hong Kong. The company raised more than $750 million in its Hong Kong offering.
The two IPOs were hugely oversubscribed by investors looking for ways to bank on China’s massive stimulus spending, which could lead to more infrastructure and construction projects of the sort likely to benefit the two firms.
Overnight in the U.S., sentiment took a hit after a key measure of consumer confidence and a handful of earnings reports disappointed investors.
The Dow finished down 11.79, or 0.1 percent, to 9,096.72.
The broader Standard & Poor’s 500 index fell 2.56, or 0.3 percent, to 979.62. But the Nasdaq rose 7.62, or 0.4 percent, to 1,975.51 after several technology companies announced acquisitions.
U.S. futures signaled a weaker start on Wall Street Wednesday.
Oil prices were lower in Asia, with benchmark crude for September delivery down $1.48 at $65.75 a barrel. The contract lost $1.15 overnight.
In currencies, the dollar lost ground to 94.42 yen from 94.47 yen. The euro traded at $1.4161 compared to $1.4172.
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