TOKYO: Asian shares fell and the euro remained under pressure on Thursday as weak euro zone data, a sluggish debt auction in Italy and fears of a potential run on Cyprus’s banks stoked investors’ concerns about instability in Europe.
Adding to the negative tone was the latest restrictive move by China, with its banking watchdog ordering banks to strengthen checks on the underlying assets of a range of wealth management products to ward off potential risks to the financial system.
Japan’s Nikkei stock average tumbled 1.6 percent, as euro zone worries prompted profit taking in exporters and financials.
The MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6 percent, wiping out the previous day’s gains, which had taken the index to a one-week high. The financials sector led the decline with a 0.8 percent drop.
“Multiple factors are denting sentiment, with uncertainties over the future of Cyprus despite the bailout, Italian political instability and bad economic indicators from the euro zone,” said Hirokazu Yuihama, a senior strategist at Daiwa Securities in Tokyo.
Despite their recent retracement, Asian shares outside of Japan have generally stayed in a range for the first three months of 2013, holding near the upper end close to their highest levels since August 2011, as improving U.S. economic growth and hopes China will stay on a recovery track helped boost investors’ risk appetite.
“China’s move to tighten property regulations has been the biggest drag for Asia. Looking ahead, whether China can keep recovering will be the main issue specific to this region,” Yuihama said, adding that Southeast Asian markets may be exposed to the biggest adjustments if negative news spurred broader selling.
Chinese shares were by far the worst regional performer on Thursday, with Hong Kong shares sliding 1.1 percent and Shanghai shares slumping 2.5 percent.
“The tightening of WMP (wealth management product) regulations is in line with our expectations, but the timing is a little earlier than we had expected (we were expecting mid-2013),” May Yan, Barclays’ top-rated Chinese banking analyst, said in a note to clients.
Trading was expected to slow ahead of the Easter holidays.
“Whatever is happening in Europe in terms of Cyprus and the ramifications of that, maybe a lot of traders just don’t want to be long or don’t want to have positions over this long weekend,” said Winston Sammut, investment director at Maxim Asset Management.