Asia Stocks Hit By Profit-Taking

Profit-taking drove Asian stock markets lower on Tuesday after comments by the Japanese Prime Minister about possible sales of U.S. Treasuries triggered a sharp overnight fall on Wall Street.

Japan has a huge investment in U.S. Treasuries and heavy sales of those securities would pressure U.S. interest rates and hurt the dollar.

Tokyos key Nikkei 225-share index fell 189.42 points on Tuesday, before recovering slightly to end down 94.21 points, or 0.46 percent at 20,341.93. The dollar steadied after a lower opening and was quoted around 114.55, while the U.S. 30-year bond was off slightly to yield 6.70 percent.

The Dows fall brought the indices down, but the supply/demand situation is still pretty good and domestic institutional investors saw it as a chance to bargain-hunt,Kasumichi Shimizu, Yamaichi Securities deputy general manager, said in explanation of the partial recovery. Ryutaro Hashimotos comments, made in New York overnight, sent U.S. financial markets into a downward spiral. The Dow Jones Industrial Average lost 192.25 points, its second-largest point decline in history, to close at 7,604.26.The dollar dropped to 114.45 yen after opening at 115.35, while U.S. Treasury prices declined, leaving the long bond yielding 6.68 percent.

 

Japanese monetary officials moved quickly to calm the markets on Tuesday. The Ministry of Finance issued a statement saying Hashimoto regretted his intentions had not been accurately conveyed.

Hashimoto had said in response to a question that several times in the past, we have been tempted to sell large lots of U.S. Treasuries.But the prime minister added: I hope the U.S. will engage in efforts and in cooperation to maintain exchange stability so we will not succumb to the temptation to sell off Treasury bills and switch our funds to gold.

The price of gold in Tokyo showed little reaction to the comments. The Dows fall triggered a sell-off in Malaysian stocks, which were off 14.34 points, or 1.32 percent, at 1,074.64. The market was already down and Wall Streets fall pushed it further, one trader said.

Hong Kong stocks also weakened, although traders attributed the decline to fevered selling of companies with financial backing from China, or so-called red chips.

he Hang Seng Index was off 130.27 points, or 0.87 percent, at 14,890.96, after opening down 195 points.

The selling was spurred by Beijings recently-issued guidelines aimed at clamping down on red chips.

Taiwan shares reversed initial sharp gains but then recovered from lows to end down 6.95 points, or 0.08 percent, at 8,919.17. Earlier, the market had tested a seven-year intraday high of 9,021.87.

Wall Streets fall should have little impact on Taiwan stocks. Investors are using this as an excuse to take profits after the indexs recent surge, said HSBC James Capel research manager Alex Chen.

Korean and Philippine stocks were the exception, with Seoul stocks inching up 0.65 point to close at 753.70. Philippine shares ended 9.62 points, or 0.34 percent higher, at 2,818.27.

Indonesian shares were off 5.36 points, or 0.74 percent, at 714.28, while Singapores Straits Times Index fell 15.51 points, or 0.81 percent, to 2,018.32.

After opening slightly higher, Thai stocks also fell victim to profit-taking, falling 6.92 points, or 1.37 percent, to 497.61.

Australias All Ordinaries Index ended off 17.9 points, or 0.66 percent, at 2,688.4, and New Zealands NZSE40 benchmark index shed 15.90 points to finish at 2,398.97.