Global Economy

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ASIA MARKETS<b>
China, Hong Kong drop in reaction to new bank rule
Markets hammered as investors focus on inflation fight and higher fuel costs</b>
By Chris Oliver, MarketWatch
Last update: 6:47 a.m. EDT June 10, 2008

Comments: 71
HONG KONG (MarketWatch) -- Asian markets suffered major losses Tuesday, led down by Shanghai and Hong Kong, where banking and property shares fronted declines.
Investors fretted about the impact of the latest round of anti-inflation measures announced over the weekend.
Shanghai's Composite Index plunged 7.7% to 3,072.33, its lowest closing level since March 22. Tuesday's trading was the first since the People's Bank of China announced it would lift the ratio of reserves banks must set aside as deposits by 1 percentage point. The adjustment comes ahead of consumer-price index data for May due out Thursday. See full story
The benchmark index for the Shenzhen stock market was down 8% at 928.20.
Hong Kong's Hang Seng Index slipped 4.2% at 23,375.52 and the Hang Seng China Enterprises Index gave up 5.4% to 12,789.87.
Chinese banking and property shares were among leading decliners amid concerns about the outlook for corporate earnings, given higher oil prices and the impact of the macroeconomic controls.
Shanghai-listed shares of China Merchants Bank and Shanghai Pudong Development Bank both fell by their daily 10% limit. Shenzhen-listed shares of property developer China Vanke was also limit down 10% before trading was halted.
"People are having a bit of a rethink on China; they are reckoning the growth rate is going to slow with these earthquake problems and high energy prices," said Howard Gorges, vice chairman of South China Brokerage in Hong Kong. "It's a revision downwards of growth expectations and profit growth in China."
China's stock markets, along with those in Hong Kong, Australia and the Philippines were closed for holidays Monday.
Hong Kong-listed shares of Sinopec (HK:386: news, chart, profile)
SNP 98.13, -2.36, -2.3%) led declines among Chinese refiners, falling 5.9% in the first day of trading since oil prices rocketed near $140 a barrel Friday.