* Markets fall on fears global recovery may be slowing
* Traders fret China, U.S. measures could brake growth
* Techs hammered, Taiwan shrs in worst 1-day fall in 6 mths
* Yen falls sharply after S&P cuts outlook on Japan
By Umesh Desai
HONG KONG, Jan 26 (Reuters) - Asian stocks slid on Tuesday,
with Taiwan suffering its worst one-day fall in six months, as
fears mounted that China could impose further measures to curb
soaring loan growth, potentially dampening a global recovery.
Highlighting fears that global growth may be sputtering,
data showed South Korea's fast recovering economy lost its
momentum in the fourth quarter and faces more serious threats
if Chinese demand slows. []
Key stock indexes in Shanghai <> and Hong Kong <>
both fell 2.4 percent, with the Hong Kong benchmark falling
below its 200-day moving average, a key long term support
level.
European stocks were set to follow Asia lower, with
financial spreadbetters expecting Britain's FTSE 100 <> to
fall 37-44 points or as much as 0.7 percent, Germany's DAX
<> to slip 20-34 points or as much as 0.6 percent and
France's CAC <> to drop 20-34 points or as much as 0.9
percent.
The yen <JPY=> shed most of its earlier gains against the
dollar <USD=><.DXY> and fell against the euro <EUR=> after
Standard & Poor's said it had cut its outlook on Japan's AA
long-term sovereign debt rating to negative from stable. By
late afternoon dollar/yen was at 90.15 yen. []
In Japan, the Nikkei average slumped 1.8 percent to a
five-week closing low, as the yen's broad rise in recent weeks
battered exporters' shares.
The S&P news came after the stock market had shut, but
10-year Japanese government bond futures <1JGBv1> slipped after
the move to 139.26 while its 5-year credit default swaps
<JPGV5YUSAC=R> widened by 3 basis points to as high as 88 bps.
Technology stocks felt the brunt of the selling in Asia in
spite of strong results from iPod maker Apple Inc <AAPL.O> and
an upbeat outlook unveiled by chipmaker Texas Instruments
<TXN.N>.
Tech shares have enjoyed a massive rally since early last
year and signs are growing that investors are now taking some
profits, fearing consumer demand for flat screen TVs and other
gadgets may weaken if the global recovery stumbles.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> fell 2 percent, with the index which tracks
technology shares down over 3 percent.
Tech-heavy markets such as Taiwan and South Korea were
especially hard hit by the sectoral rout and fears of ebbing
Chinese demand.
Taiwan's main index <> fell 3.5 percent to its lowest
close since Nov. 30, 2009, with UMC <UMC.N>, the world's No. 2
contract chipmaker, tumbling 5.2 percent. In Seoul, the KOSPI
index <> fell nearly 2 percent as shares of memory chip
maker Hynix <000600.KS> slumped more than 9 percent.
Currencies which are more sensitive to global growth like
the Australian dollar <AUD=D4> and the New Zealand dollar
<NZD=> also fell after China implemented a previously ordered
increase in reserve requirements for some banks.
"The market is beginning to pricing in rate hikes in the
region and potential withdrawal of liquidity and accomodation,"
said Binay Chandgothia, chief investment officer at fund
manager Principal Global Investors in Hong Kong.
"China has started taking small baby steps and so
investments which were based on the low rates theme is now
leaving the market now," he said.
Chandgothia added that it was likely macro hedge funds
which are focused on monetary policy outlooks were selling on
expectations of tightening in the region.
China implemented a planned increase in required reserves
for some banks on Tuesday, sources told Reuters.
The punitive increase in the amount of reserves some banks
have to set aside, which was ordered last week, came as a
newspaper report said China's efforts to curb bank lending were
meeting with mixed success, fueling fears that policymakers may
take more aggressive action soon to keep the economy from
overheating. []
No new banks have been slapped with fresh higher reserve
requirement ratios, the sources said. However, unless loan
growth moderates, analysts said further tightening and an
eventual interest rate rise are inevitable after the long
Chinese New Year holidays next month.
Moves by Chinese authorities in recent weeks to tighten
liquidity and curb lending have rattled investors around the
world on worries the global economy is not strong enough yet to
wean it off massive government stimulus.
A planned spending freeze in the United States, where
President Barack Obama is under pressure to rein in the
deficit, added to worries about the global growth outlook.
"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."
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. []
Financial markets are now focused on key economic
indicators such as U.S. GDP due out later in the week.
"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 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)
