HONG KONG, Jan 26 (Reuters) - Asian stocks fell on Tuesday
as fears of further clampdowns on lending in China and a U.S.
plan to freeze domestic spending sparked worries about the
outlook for global growth.
Highlighting fears that a global recovery may be
sputtering, South Korea reported weaker-than-expected growth in
the fourth quarter, which cast douts about consumption in
Asia's fourth-largest economy. Stocks in Seoul <> fell
nearly 2 percent. []
"The budget freeze in the United States, along with the
latest moves by China, will hurt the South Korean economy, if
not cripple all the recent recovery momentum," said Park
Sang-Hyun, chief economist at Hi Investment & Securities in
Seeoul.
"The global economy still needs government spending to stay
on the recovery path."
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 1.2 percent, with banks and technology
shares leading the decline as they have for much of the past
week after the White House proposed new restrictions which
would hit profits at big banks.
The Nikkei <> fell 1 percent as investors grew cautius
heading into Japan's earnings seen and awaited key economic
indicators such as U.S. GDP later in the week.
U.S. President Barack Obama, under pressure from deficit
hawks, will seek a three-year freeze on domestic spending in
his 2011 budget that would save $250 billion by 2020,
administration officials said on Monday. []
While financial markets would welcome any attempts by the
U.S. to gets its longer-term debt under control, some in Asia
were concerned a spending freeze now could rob the U.S. economy
of its newfound growth as its struggles to throw off recession.
Sentiment was further eroded after banking sources said
China had implemented its latest rise in bank reserve ratios to
curb excessive lending. Sources said several Chinese banks
would see their extra reserve ratios take effect today
(Tuesday). []
The central bank told some banks last week to increase
their reserve ratios by 0.5 percentage point. No new banks have
been slapped with fresh higher reserve requirement ratios, the
sources said.
Asian shares also recoiled as a newspaper said Chinese
policymakers were still finding it difficult to rein in strong
lending by banks despite taking increasingly assertive actions
to slow strong credit growth, which Beijing fears could spur
inflation and lead to economic overheating. []
Robust Chinese demand has been driving an Asian and global
recovery, offsetting persistent weakness in the United States,
Europe and Japan. Markets fear more aggressive action by its
central bank to moderate growth could slow that recovery,
reducing its demand for commodities and other imported goods.
Shanghai stocks <> fell 2 percent and Hong Kong's Hang
Seng index <> slid 1.7 percent.
The yen rose broadly after selected Chinese banks were
ordered to raise their reserve ratios from Tuesday.
The dollar fell to 90.02 yen <JPY=>, pulling away from its
intraday high of 90.56 yen. The dollar was last at 90.13 yen,
down 0.2 percent on the day.
Market players said the yen would take further cues from a
Bank of Japan policy decision due later on Tuesday.
The BOJ is seen likely to keep interest rates at 0.1
percent and to hold off on new initiatives at its meeting,
having introduced a new funding operation last month after a
period of intense government pressure for action to support the
fragile economy. []
"The overriding concern is still the tightening on China's
part," said John Mar, regional co-head, Asia equity sales at
Daiwa Capital.
"This morning's headlines about the loans of big banks
exceeding 1.4 trillion is probably a signal to the market that
the Chinese government will be still vigilant on tightening
measures," said Daiwa's Mar.
Oil <CLc1> fell below $75 a barrel on fears that global
energy demand will cool if the recovery looses steam.
(Editing by Kim Coghill)
