Asian markets started 2010 with declines recorded, raising concerns that the region could experience a modest correction amid its strong economy.
Reports said that Chinese banks will restrain lending, and data from South Korea sent markets across the region into negative territory. HK’s Hang Seng Index dropped 2.4 percent, the lowest level since September 3. The Shanghai Composite of China fell 2.4 percent while South Korea’s Kospi ended 2 percent lower after its government reported a GDP growth of 0.2 percent. In Japan, the Nikkei Stock Average of 225 companies dropped 1.8 percent.
"Asia was perceived to be the place with growth in a growthless world, and a lot of money came in last year. That story seems to be mutating, and the new story we don’t entirely know yet," said Mark Mathews, a strategist at HK’s Macquarie Group.
Tuesday’s result indicated that the market has started 2010 in a downward trend. After a good recovery in 2009, the Hang Seng fell 8 percent year-to-date. Singapore’s STI also fell 5.2 percent, and the Shanghai composite dropped 7.9 percent.
The Asian markets often follow the trend of the US market, but despite New York’s good results on Monday, Asia ended up uniformly lower. Driving the market into the pit includes speculation that China was tightening its money supply to prevent inflation and that the country’s largest banks have restrained making new loans after a record expansion of credit.
The drawback left many investors wondering if this is only a natural relaxation of markets following China’s tightening of the monetary cycle, or whether a more serious correction awaits.
“The turn is real and it has legs,” said Denis Gould, Investment Director of AXA Investment Managers.