Asia stocks fall as Europe tensions rise

By Sarah Turner, MarketWatch

HONG KONG (MarketWatch) — Most of the major Asian markets fell Tuesday, with stocks in Hong Kong and Tokyo hit particularly hard as Europe’s political troubles forced their way back into investor focus.

Hong Kong’s Hang Seng Index HK:HSI +0.63%  tumbled 2.3% for its biggest single-day percentage loss of this year, while Japan’s Nikkei Stock Average JP:100000018 +3.77%  sank 1.9%.

South Korea’s Kospi KR:SEU -0.10%  fell 0.8%, while Australia’s S&P/ASX 200 AU:XJO +0.78%  and Taiwan’s Taiex XX:Y9999 +0.25% lost 0.5% each.

Ranking among the gainers, China’s Shanghai Composite CN:000001 -0.06%  advanced 0.2% after a choppy trading session. 

“The market isn’t looking at the fundamentals but is back to the binary risk-on/off syndrome as fears over Europe resurface, focused on Spain and Italy,” said Andrew Sullivan, head of sales trading at Kim Eng Securities.

“Another issue for Hong Kong is that we are in the runup to Chinese New Year, and retail investors may take this opportunity to lock-in recent gains and take cash to put in their lai-see packets,” he said, referring to the customary red envelopes with cash gifts that are exchanged during the holiday.

Euro-fears revive

U.S. stocks took some heavy losses Monday, as uncertainty over Europe rattled investors and triggered a steep pullback from five-year highs. Dow Jones Industrial Average futures were up 15 points, or 0.1%, at 13,860 by late afternoon in Hong Kong. Read: Stocks’ worst day of year sends Dow below 14,000.

“The current flare-up in worries has to do with rising political risk in Spain and Italy,” said Barclays Capital strategist Aroop Chatterjee.

“Markets have been increasingly comfortable with European risks over the past few months and are largely not positioned for this increase in political problems. The outcomes in Spain and Italy are far from certain and may represent stumbling blocks for further expansion in risk appetite,” Chatterjee said.

The Hong Kong market suffered particularly heavy selling, with heavyweight HSBC Holdings PLC HK:5 +1.35%   HBC -0.11%  — which has a major presence in Europe — down 2.7% amid the concerns over Italy and Spain.

386 8.92, +0.18, +2.06%
HSI 23,294.05, +145.52, +0.63%

Sinopec shares Vs. Hang Seng Index

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One-year price moves

European markets sold down overnight, with opinion polls in Italy showing weakening support for the current austerity reforms, and a political corruption scandal plaguing Spain. Read: Italy, Spain jitters spook Europe markets.

Among other Hong Kong movers, shares of Sinopec — formally known as China Petroleum & Chemical Corp. HK:386 +2.06% SNP +1.12%  — skidded 6.4% on fears of equity dilution after announcing a $3.1 billion private share placement. Read: Sinopec raises $3.1 billion in private share sale.

Recent gainers in the consumer, property and financial sectors also suffered losses, with Bank of China Ltd. HK:3988 +1.58%   BACHY -1.61%  lower by 3.8%, and Henderson Land Development Co. HK:12 +0.56%   HLDVF -2.27%  dropping 3.9%.

Banks also fell sharply on mainland Chinese bourses to give back recent gains. Agricultural Bank of China Ltd. CN:601288 +0.63% ACGBY -1.57% fell 1.2%, China Citic Bank Corp. CN:601998 +0.99% CHCJY 0.00%  dropped 2.7% and China Construction Bank Corp. CN:601939 +0.60%   CICHY -0.94%  shed 1.4%. 

Japanese exporters were also weaker after a recent advance, with Mazda Motor Corp. JP:7261 +4.43% MZDAF -1.00%  dropping 3.2%. The stock is still up more than 10% so far in February.

Sharp Corp. JP:6753 +0.60%   SHCAF +2.74%  fell 3.5%, while Fuji Heavy Industries Ltd. JP:7270 +5.14%   FUJHY +0.10%  lost 3.6%.

Heavyweight retailer Fast Retailing Co. JP:9983 +4.00% FRCOF -2.01% retreated 3.2% after reporting a 5.5% drop in same-store sales at its Uniqlo casual-clothing store chain.

Fujitsu Ltd. JP:6702 +3.12%   FJTSY +0.77%  retreated 3.8% after a Nikkei newspaper report that the firm will post a fiscal-year net loss of almost ¥100 billion ($1.1 billion), hurt by costs relating to revamping its semiconductor business.

Hitachi Ltd. JP:6501 +1.32%   HTHIF -1.36%  tumbled 6.4% as investors reacted to a lower fiscal-year outlook from the conglomerate and a 38% drop in quarterly net profit, which missed analysts’ expectations.

In Australian trading, hearing-aid company Cochlear Ltd. AU:COH -4.06% CHEOY -8.58%  tumbled 9.3%, retracing recent gains, after the firm said it returned to a profit in its fiscal first half, but at a lower level than analysts had expected.

Earlier in the day, the Reserve Bank of Australia’s decided to leave its benchmark interest rate unchanged at 3%, as widely expected. Read: Australia keeps policy interest rate on hold.

The South Korean market saw sizeable losses for tech firms, with heavyweight Samsung Electronics Co. KR:005930 -0.56%   SSNLF +1.82%  slipping 0.1% and chip maker SK Hynix Inc. KR:000660 +3.38%   HXSCL 0.00%  dropping 2.5%.

Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW.