Asian markets shrugged off Wall Street's gains and bled into the red Wednesday, as earnings downgrades and disappointments weighed on investor sentiment.
The Hang Seng dropped 638 points, or 2.6%, to 23,653, while China's Shanghai Composite Index fell 40 points, or 0.9%, to 4417. In Japan, the Nikkei lost 133 points, or 1%, to 13,345.
Other Asian markets fell in line with Hong Kong and Japan. Taiwan's Taiex eased 33 points, or 0.4%, to 7543, and South Korea's Kospi tumbled 49 points, or 3%, to 1589. In India, the Bombay Sensitive Index finished 333 points, or 1.8% lower, at 17,758, perturbed by Tuesday's pat stance on interest rates by the central bank.
Insurance firms in Hong Kong and China took a beating following an announcement by
China Life Insurance(LFC Quote - Cramer on LFC - Stock Picks) that it projects net profit to grow by 50%, to 14.38 billion yuan ($2 billion) vs. analysts' expectations of 80% growth.
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"People's high expectations are weighing a lot on the markets. Even in the case of companies like China Life Insurance, where earnings are very good, people were expecting a lot more," says Richard Lee, an analyst for Core Pacific Yamaichi in Hong Kong.
Shares in China Life Insurance plunged 7.4%, to HK$29. China's second largest insurer
Ping An(PIAIF Quote - Cramer on PIAIF - Stock Picks), which met expectations Tuesday, doubling earnings to 7.34 billion yuan ($1 billion), also fell. The stock dropped 6.5%, to HK$57.40, as analysts said that investors were concerned about whether excess cash would weigh on future growth.
Telecoms also fell, although
China Unicom(CHU Quote - Cramer on CHU - Stock Picks) bucked the trend as it said that earnings would be more than double the 3.7 billion yuan ($515 million) achieved in 2006. China Unicom gained 1.7%, to HK$18.
Market leader
China Mobile(CHL Quote - Cramer on CHL - Stock Picks) tumbled 3.7%, to HK$113.60, while
China Netcom(CN Quote - Cramer on CN - Stock Picks) lost 2%, to HK$24.10, and
China Telecom(CHA Quote - Cramer on CHA - Stock Picks) eased 1.8%, to HK$5.58.
Among tech shares,
Alibaba.com(ALBCF Quote - Cramer on ALBCF - Stock Picks) slipped 6.8%, to HK$18.92, as dealers said that hedge funds were unloading big positions throughout the day. ADRs in
Baidu.com(BIDU Quote - Cramer on BIDU - Stock Picks) were following in Frankfurt morning trading, off 4.4%, to 178.47 euros. Lee says that "fundamentally" Alibaba.com is a good company, and that shares have been selling off due to overvaluation in 2007. "In Asia you see much quicker panic selling than elsewhere," adds Lee.
On the mainland, the insurers dragged on the financial sector.
Bank of China(BACHF Quote - Cramer on BACHF - Stock Picks) declined 1.4%, to 5.53 yuan, while
Industrial & Commercial Bank of China(IDCBF Quote - Cramer on IDCBF - Stock Picks) slid 2.9%, to 6.46 yuan.
Transportation stocks continued to be the biggest victims of the
snowstorms in China.
Air China(AIRYY Quote - Cramer on AIRYY - Stock Picks) dipped 3.5%, to 20.71 yuan, while
China Eastern Airlines(CEA Quote - Cramer on CEA - Stock Picks) lost 2.7%, to 14.82 yuan. Since the snowstorms began a week ago, Air China has lost 20% of its market value, and China Eastern has slipped back 16.5%.
The price of the yuan rose to its highest level since the dollar peg was abolished in 2005, to 7.19 yuan vs. the dollar, as currency traders speculated the snowstorms would push inflation higher.
In Japan, a weakening yen could not help offset losses spurred by more subprime jitters. The yen fell to 107 vs. 106.6 previously in Asian trading.
Mizuho Financial(MFG Quote - Cramer on MFG - Stock Picks) announced that it will writedown as much as 300 billion yen, or $2.8 billion, on subprime losses, and that it would inject cash into its ailing securities subsidiary. Mizuho lost 1.6%, to 49,500 yen.
Mitsubishi UFJ(MTU Quote - Cramer on MTU - Stock Picks) held up however, off 0.1%, at 1029 yen.
Honda(HMC Quote - Cramer on HMC - Stock Picks) bucked the negative trend and rose 1.2%, to 3300 yen, after
the company announced fourth-quarter profit rose 38%, to 200 billion yen, or $1.9 billion. In a phenomenon that gave some investors hope of exaggeration in reports of a global consumption slowdown, Japan's second-largest carmaker cited an increase in sales in the U.S. and Europe.
Daniel M. Harrison
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