Shares on the Chinese mainland bucked the trend and gained Friday against a U.S.-led regional selloff, as local investors viewed high commodity prices and a sharply rising yuan as bullish signals of growth.
The Shanghai Composite Index rose 49 points, or 1.1%, to 4348, but other major markets were driven lower. The Hang Seng in Hong Kong fell 260 points, or 1.1%, to 24,331, while Japan's Nikkei lost 322 points, or 2.3%, to 13,603.
In Singapore, the price of oil hit a new high of $103.05 a barrel during the afternoon. At the same time, gold also rose to a record $973.38 an ounce, propelled in part by demand in China. The yuan was gaining for a second day, to 7.11 against the dollar, after the People's Bank of China said it would consider floating the currency for speculative purposes in Hong Kong.
"Investors want to own hard assets, and this will continue the current U.S. dollar weakness we are seeing -- high hard and soft commodity prices, a high gold price, and a high oil price," says Gavin Parry, a director of Helmsman Global Trading in Hong Kong.
While commodity stocks like
Sinopec Shanghai Petrochemical
Aluminum Corp. of China
all rose in Shanghai trading, they fell in Hong Kong, which was mired in gloom spurred by
chief Ben Bernanke.
PetroChina gained 1.5% to 22.57 yuan on the mainland, but lost 1.8% to HK$11.84 in Hong Kong. In Shanghai, Sinopec rose 0.8% to 12.69 yuan, but dropped 1.9% to HK$8.85 in Hong Kong. Aluminum Corp. ended up 0.2% at 32 yuan on the mainland and fell 2.4% to HK$15.70 in Hong Kong, as traders exited what they now say is a heavily overbought stock.
Differences between mainland "A" share price movements and those listed in Hong Kong usually lead to heavy volatility in ADRs, say dealers.
Investors in gold-mining stocks got luckier, however.
rose 5.9% to HK$35.75, while
managed a gain of 1% to HK$10.66, despite heavy profit-taking toward the end of the trading session.
Financials didn't fare so well.
lost 1.9% to HK$120.70, and despite a bullish session in Shanghai, market leader
Bank of China
lost its gains toward the end of the session and ended flat, at 5.55 yuan.
"The U.S. is down thanks to Bernanke's comment that small banks could go belly up," says Steven Wong, a trader for Daiwa Bank in Hong Kong.
"Bernanke's comments that some banks will fail is like asking if the Pope is Catholic. The comments we're reading point to the Fed losing credibility," adds Helmsman's Parry.
Telcos in Hong Kong were being heavily shorted, though dealers said that the stocks were not being unloaded by funds that hold them.
ended 0.4% off, at HK$120, and
slid 4.3% to HK$17.14.
Some observers now speculate that earnings, the majority of which are due to be released in the coming two weeks, will be worse than expected. This could contribute to a further drop in share prices, they say.
"Costs keep rising, with oil, coal, iron ore and wheat at record highs. This has not mattered until now because top-line growth has been so strong. But with the top line set to disappoint this year, escalating costs will bite," says Tim Rocks, chief strategist for Maquarie Bank in Hong Kong.
Rocks points out that since 2001, just 9% of companies have raised margins for three consecutive years, and a fifth have managed two years of profit margin growth in the same time period.
Japanese shares were stunted by a rising yen and by jitters over the health of the U.S. economy. The yen rose to 104.18, its highest level against the dollar in nearly three years.
Leading decliners were the stocks that have shown the most resilience to recent Asia selloffs.
plunged 5.7% to 53,300 yen, while
plummeted 6.3% to 446,000 yen.
all lost ground, despite recent demand for the companies. Sony fell 4.6% to 4990 yen, and Honda finished 3% lower, at 3260 yen. Kobe Steel dipped 1.8% to 332 yen.
In India, official data showed that the economy expanded 8.4% during the fourth quarter last year vs. 8.9% in the same period in 2006. The slowdown prompted a selloff in capital markets. The Bombay Sensitive Index fell 1.4%, to 17,578.
Other Asian markets followed in the decline. The South Korean Kospi slipped 1.4% to 1711, while the Taiwanese Taiex gave back 0.6% to 8412.
Be sure to check out the Far East Portfolio at Stockpickr.com to find out which stocks in India and China are making big moves and announcing major news.
Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at
. He lives in New York.