By Chao Deng And Brad Frischkorn
HONG KONG--China shares fell on the latest sign of weak
manufacturing activity in that country, while concerns about global
growth kept pressure on much of the rest of the region.
The Shanghai Composite Index finished down 2.6% at 3128.30,
while Hong Kong's Hang Seng Index slipped 0.1% to 24484.74, after a
final gauge of manufacturing activity for January by HSBC Holdings
PLC inched higher, but still indicated a contraction from the
previous month.
A separate reading by the government fell to a
weaker-than-expected level, marking the first contraction since
September 2012, official figures showed Sunday.
Shares of China Minsheng Banking Corp. were down more than 3% in
both Hong Kong and Shanghai, after the privately owned lender said
its president, Mao Xiaofeng, resigned for personal reasons. A local
financial magazine reported that Mr. Mao had been questioned by
Beijing's antigraft agency as part of a broad campaign to root out
corruption.
China's yuan dropped to its weakest in over eight months against
the U.S. dollar on the guidance of the country's central bank amid
speculation that the bank could widen the currency's trading band,
paving the way for further depreciation.
The rest of Asia was mixed after Wall Street and the dollar
dropped following Friday's disappointing U.S. gross domestic
product figures for October-December.
Weaker U.S. growth would undercut the Federal Reserve's
assessment of the economic recovery, one factor it uses to guide
its decision about when to raise interest rates. Higher U.S. rates
would increase returns on assets denominated in dollars, bringing
more investors to the currency.
Japan's Nikkei Stock Average was down 0.7% at 17558.04, Korea's
Kospi index gained 0.2% to 1952.68, and Australia's ASX/200 was up
0.7% at 5625.30, its highest level since last September.
Losses in Tokyo tracked the fall in U.S. stocks. Treasury yields
and the dollar fell sharply--negatives for currency-sensitive
Japanese exporters that rely on a higher dollar for improved
profitability.
The greenback recovered slightly in Asia, helping Japanese
stocks come off its lows for the day. The U.S. dollar was last at
Yen117.59.
"The GDP figures weren't that bad, but there is a sense of
deceleration in the U.S. economy, which is in turn reflected in
weaker bond yields," said Takashi Hiroki, chief strategist at
Monex. "Without higher rates to prop up the dollar, further yen
weakness--a key component to Japan stock investing--will be
arrested."
Japanese markets are in the middle of the earnings season. Honda
Motor Co. Ltd. was up 3.3% after reaping Yen44 billion in currency
gains amid a weakening of the local currency last year. Still, the
car maker's net profit for the quarter ended December fell 15% from
a year earlier, in part from an airbag-related recall. Some
analysts said the weak results represented a fundamental bottom for
Honda, finding a silver lining to the end of the air-bag saga, and
a solid pipeline of attractive models.
Cosmetics maker Shiseido fell 5.3% after booking third-quarter
results showing operating profit fell sharply from a year earlier
to Yen7.9 billion, missing estimates.
In Australia, investors appeared to shrug off data from China,
the country's largest trading partner, while expecting that the
country's reserve bank will lower interest rates when its
policy-making board meets for the first time this year. The market
is now pricing in a 69% chance of a rate cut on Tuesday, according
to brokerage IG.
--Vera Sprothen contributed to this article.
Write to Chao Deng at Chao.Deng@wsj.com and Brad Frischkorn at
bradford.frischkorn@wsj.com
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