Asian markets fall on growth fears

Hong Kong shares dived to a four-month low on Wednesday after official Chinese media reported flat loan growth in the first two weeks of May for the country's "Big Four" state-owned banks, fanning fears about the slowing Chinese economy.

Hong Kong shares dived to a four-month low on Wednesday after official Chinese media reported flat loan growth in the first two weeks of May for the country's "Big Four" state-owned banks, fanning fears about the slowing Chinese economy.

Asian markets were firmly in "risk off" mode with the weak outlook for loan growth in China, Greece's failure to form a government and losses on Wall Street keeping investors wary.But Hong Kong bore the brunt of the sell-off, partly because some investors were caught wrong-footed and sold down positions after buying into Tuesday's short-covering rally on hopes that markets may have stabilised, traders said.Chinese financials and other sectors tied to the economy were among the worst hit. Europe's largest bank, HSBC Holdings,which has the biggest weighting in the Hang Seng Index, lost 2.1 per cent, set for its worst day since Nov.10,when it lost 9.1 per cent.

One trader at an Asian brokerage in Hong Kong said some European funds had covered short bets and even gone long overnight but exited quickly after the Hang Seng Index opened much weaker than other regional markets.At midday, the Hang Seng Index was down 2.7 per cent at 19,365.6, breaking below its 200-day moving average, currently at 19,831.9, which is likely to become a significant level for the benchmark with a possible break on either side setting the direction for the market.

Mainland Chinese markets were also lower but relative outperformers. The CSI300 Index slipped 0.7 per cent, while the Shanghai Composite Index lost 0.4 percent."I think there is an expectation in China for more drastic policy action by Beijing, which is why markets in the mainland are holding out better than in Hong Kong," said Hong Hao, chief strategist at Bank of Communications International Securities.

Optimism that the end of Hong Kong's long streak of losses could pave the way for a short bounce was short-lived after a Shanghai Securities News report said new lending by China's four biggest state-owned banks was flat in the first two weeks of May.

Hong said he was "100 per cent certain" the Chinese central bank would act again in June, although he doubts the effectiveness of another cut in reserve requirements."Beijing will probably have to ease up on the property sector as well to stimulate loan demand, given it's such a big part of the economy," he said.


Reuters.