Asia started the week on a choppy note, with troubling rumors assuaged by late buying in Hong Kong, while markets in China plunged on perceived weakness in the much-anticipated IPO of China Railway.

Inflation concerns and security fears also rattled Shanghai's index, which tumbled 154 points, or 3.6%, to 4146. In Hong Kong, the Hang Seng regained strength after a down day to end up 203 points, or 0.9%, at 22,705. Japan's Nikkei gave away 250 points, or 2%, to 12,532, on more worries over the U.S. economy.

"The whole of the Chinese market will slow down for the next one to two months," says Cheng Wei Qing, chief strategist at Citic Securities in Beijing. "Everybody expects that in the summer the market will be up due to the Olympic games. I don't think the Olympics are a big deal because China is a huge country, and the impact is limited."

On Sunday, authorities grounded a Beijing-bound China Southern Airlines flight on suspicion of terrorism. Travel and consumer stocks were hit hard by the news on the mainland, though Hong Kong brushed off the terrorism fears by the end of the trading session.

Air China ( AIRYY) dropped 5.3% to 18.38 yuan, but the Hong Kong-listed shares regained at the close to finish off just 1.3% at HK$6.86. China Eastern Airlines ( CEA) fared similarly, down 4.5% in Shanghai at 14.39 yuan, and off 3.6% in Hong Kong, at HK$4. Sportswear maker and Olympic stock Li Ning ( LNNGF) lost 2.6%, to HK$22.95.

Commodity stocks were also off in China, as Aluminum Corp. of China ( ACH), PetroChina ( PTR), and Sinopec Shanghai Petrochemical ( SHI) all fell, despite resilience from commodities. Oil was trading at $105.08 a barrel in Singapore during the Asian afternoon.

Aluminum Corp. fell 4.4% to 29.41 yuan, and PetroChina slipped 2.8% to 22 yuan. Sinopec Shanghai Petrochemical dipped 2.5% to 12.24 yuan.

Chen says that despite high commodity prices, share prices of oil companies in China are failing to make a leap because of strict price controls being maintained by Beijing officials. Such price controls, he says, mean that refiners and retailers cannot pass on price increases when they sell the liquid energy.

In Hong Kong, HSBC Holdings ( HBC) ended up after a day of choppy trading, spurred by a rumor that the bank was seeking to acquire UBS ( UBS). The rumor, which first appeared in an article in the U.K. Independent newspaper, was unfounded according to several Hong Kong-based market participants. HSBC Holdings jumped 2.9% to HK$120.80.

Telcos also had a strong afternoon, riding the late momentum. China Netcom ( CN) added 3.2% to HK$24, and China Unicom ( CHU) rose 2.5% to 17.80. Market leader China Mobile ( CHL) gained 0.9% to HK$111.10.

"If the Hang Seng gets to around 21,700 points, then the market may rebound immediately from this level," says Castor Pang, a buy-side analyst for Sun Hung Kai in Hong Kong. "China will put a lot of effort into security, and terrorism will not be a problem during the Olympic games, either," adds Pang.

In Japan, the yen hit fresh highs vs. the dollar, at 101.98 yen. That was enough to topple Japanese exporters, which along with turbulent foreign exchange data, took a beating over U.S. unemployment numbers. Sony ( SNE) fell 5% to 4,380 yen, and Nintendo ( NTDOY) dropped 2.7% to 51,200 yen.

Every one yen movement against the dollar wipes 6 billion yen, or $59 million, off Sony's bottom line, according to new Bloomberg data. The report also cited a 93% correlation between the Nikkei and the yen, meaning that the index falls more or less in tandem with a rise in yen values.

Other Asian markets fared poorly. In Taiwan, the Taiex lost 2.7% to 8299, while the South Korean Kospi fell 2.3% to 1625. India's Bombay Sensitive Index declined 0.3% to 15,923, after recovering in a late Hong Kong-led rally.

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 www.theglobalperspective.biz. He lives in New York.

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