Asian stocks fell across the board yesterday after the European Central Bank lent more money than expected to euro-zone banks, shattering the optimistic view that the region's debt crisis might finally be under control.
The Hang Seng Index ended its two-day rally, sliding 38.22 points, or 0.21 per cent, to close at 18378.23 yesterday. Its daily turnover dropped to another record-low for the year, totalling only HK$33.4 billion.
Global consumer products trading company Li and Fung, which is heavily exposed to the vagaries of global trade, led the chart of worst-performing shares in terms of percentage loss. It shed 2.9 per cent, or 42 cents, to close at HK$14.14.
China PingAn and Citic Pacific dropped 1.8 per cent and 1.6 per cent respectively.
The Standard and Poor Asia ex Japan 200 index dropped 1.18 per cent. Stock exchanges in Shanghai, Shenzhen, Taiwan, Seoul and Tokyo all slipped into negative territory.
Francis Cheung, head of China-Hong Kong strategy for brokerage firm CLSA, said the market was currently dominated by pressure to sell and there was little appetite to buy.
Cheung predicted the stock market in Hong Kong would remain weak until after the Chinese New Year holiday in January, when the central government was likely to announce a cut in reserve requirement ratio for banks. He also expected the Hang Seng Index to reach only 21,700 next year, overshadowed by the euro zone crisis but still cushioned by solid growth in the mainland economy.
'The global economic slowdown has helped China moderate its economic growth,' said Cheung, who expected 8 per cent GDP growth for China in 2012.
Glenn Levine, senior economist at Moody's Analytics, said Asia would enter into a broad-based slowdown in the first half of next year.
The shift in global investor sentiment and sudden capital withdrawals could cause Singapore and Hong Kong, both small, open financial centres highly leveraged to global capital flows, to enter recession under a global credit crunch, Levine said. But China and Japan, which financed most of their lending domestically, would be relatively stable.
Indonesia, Korea and Taiwan would also be vulnerable to a global credit squeeze, Levine said.
Banny Lam, associate research director for China Construction Bank International, said the outflow of international investors' money from emerging markets back to the US and Europe could also slow down the appreciation of the yuan.
The year-on-year fall in the Hang Seng Index thus far in 2011