Asian stocks follow Wall Street down on poor US homes data

Investors sold Asian stocks on Wednesday as the optimism over China's move to make its currency more flexible was replaced by concerns over the global economy caused by weak US housing data.

A foreign exchange dealer passes by an electronic board at the head office of Korea Exchange Bank in Seoul on June 21, 2010. (AFP Photo)

Hong Kong was 0.13 percent lower, Tokyo shed 1.69 percent by the break and Sydney fell 1.15 percent while Singapore dropped 0.64 percent. Shanghai slipped 0.73 percent.

Wall Street was off 1.43 percent after figures showed the property market in the world's biggest economy was struggling.

Existing-home sales fell 2.2 percent in May after two consecutive rises, the National Association of Realtors said Tuesday, despite support from a government tax-incentive programme.

The report "suggests that there may be greater fundamental weakness in housing demand than anticipated", said Celia Chen at Moody's Economy.com.

"The optimism we saw a few days ago has been snuffed by that weak US home sales data," BBY senior institutional trader Peter Copeland told Dow Jones Newswires in Sydney.

The euro fell back as traders became more risk averse because of the falling stock markets.

The single currency bought 1.2245 dollars and 110.87 yen in Tokyo morning trade, down from 1.2270 and 111.12 in New York late Tuesday. The dollar slipped to 90.44 yen from 90.54 yen.

Regional markets soared on Monday after Beijing's weekend announcement that it would allow the yuan to strengthen against the dollar.

However, that optimism faded the next day on the realisation that there would not be any major near-term changes to the foreign exchange controls by the Chinese government.

On Tuesday US Treasury Secretary Timothy Geithner welcomed China's announcement but called for "vigorous implementation" of the move.

"The yuan-dollar rates have not moved much since the announcement. This confirmed anew that the Chinese authorities are aiming for an extremely gradual liberalisation of the currency system," Credit Suisse said in a report.

China's central bank let the yuan weaken Wednesday, setting the central parity rate -- the centre point of its allowed trading band -- at 6.8102 to the dollar, 0.18 percent weaker than Tuesday's 6.7980.

Eyes will now be on the end of a two-day policy meeting at the US Federal Reserve, where analysts will be looking for clues to the state of the economy.

Chinese shares were also hit after the government said it would scrap an export tax rebate on some commodities including metal products and chemicals, dealers said.

The removal of the rebate, from July 15, aims to reduce excess capacity in certain sectors by discouraging exports and comes after Beijing said it would ban capacity expansion plans in the steel industry as of the end of 2011.

Oil was lower. New York's main futures contract, light sweet crude for delivery in August dropped 68 cents to 77.17 dollars a barrel, while Brent North Sea crude for August was off 70 cents to 77.34 dollars.

Gold opened at 1,240.00-1,241.00 US dollars an ounce in Hong Kong, up from Tuesday's close of 1,236.50-1,237.50 dollars.

Source: AFP

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