Asian Shares Drop On DJIA's Fall; Cyclical Stocks Weak

SINGAPORE -- Asian stock markets were falling Wednesday after a weak session on Wall Street, with analysts saying a correction was due after months of gains. Cyclical stocks were leading the declines in Tokyo and Sydney.

"Everyone has been calling for a pullback," said Patersons private client adviser Chris Blair. "Economic data are still okay and the longer-term view is bullish, but in the short term I think there has to be some profit-taking."

Japan's Nikkei 225 was down 2.8%, with South Korea's Kospi Composite down 1.3%, Australia's S&P/ASX 200 off 1.8% and New Zealand's NZX-50 falling 1.0%.

The Industrial Average lost 2.0% Tuesday, even though the Institute for Supply Management's monthly manufacturing index marked its highest reading since June 2007.

"Tellingly, on a day when a green shoot seemed to blossom, an old worry rose to the fore - concerns about the health of banks, though one might struggle to pinpoint a definitive trigger for the day's move, apart from the calendar," said David Watt, Senior Currency Strategist at RBC Capital Markets.

"There has been intense focus over the past few weeks on the historical fact that September can be painful to equities. Not usually so early though," he added. DJIA futures were three points lower in screen trade.

Investors were still watching Chinese markets, with volatility of late in the Shanghai Composite Index causing some concern offshore.

Financial stocks were weaker across the region. In Japan, Mizuho Financial was down 2.7% while Daiwa Securities lost 2.6% and Nomura fell 1.8%. In Australia, Macquarie was down 2.7%, NAB down 3.0% and ANZ down 2.6%. Korea's KB Financial was down 3.4%.

Japanese exporter stocks were hit also by a stronger yen, with Sony down 3.6% and Canon down 3.3%.

Australian cyclical stocks were weak, with BHP Billiton down 2.1% and Rio Tinto down 3.2%.

In Korea, Samsung Electronics was down 2.1%, though Hyundai Motor gained 0.9% and Kia Motors rose 0.6%, outperforming the broader market after posting solid U.S. sales for August.

In New Zealand, Fletcher Building was down 1.4%, Contact Energy was off 1.5% and Warehouse down 1.3%. But NZ Farming Systems Uruguay gained 7.3% on news Singapore's Olam International was taking a 14.4% stake in the company.

Increased risk aversion was the main theme for foreign exchange markets, with the euro weakening to its lowest levels against the yen since July 15, touching Y131.47. It last traded at Y131.63, from Y132.12 in New York.

The single currency was also weaker against the U.S. dollar, at $1.4191 from $1.4217, while the dollar was at Y92.72, from Y92.83.

The Australian dollar and the New Zealand dollar fell against the greenback. The Australian dollar was at US$0.8253, from US$0.8419 in Sydney on Tuesday and the New Zealand dollar at US$0.6740, from US$0.6866.

Khoon Goh, Senior Markets Economist at ANZ Bank, said US$0.6650 for the New Zealand dollar was "not out of the question."

Japanese government bond futures hit a five-month high at 139.50 on the Nikkei's fall. The lead September contract was last up 0.20 at 139.43 points. The five-year JGB yield was down 0.5 basis point at 0.595%, its first time been below 0.6% since September 2005.

But RBS Securities Strategist RuiXue Xu said JGB gains may be tempered by next week's shift of the lead contract from September to December, prompting market players to close out open interest in the September contract.

Base metals trade was quiet after Tuesday's big falls, with LME three-month copper at $6,155 per ton, down $40 from London kerb. Three-month aluminum was at $1,850, up $5. Spot gold was down $4 from New York at $953.20 per troy ounce.

The October Nymex crude oil futures contract was 10 cents higher at $68.15 per barrel on Globex, after falling 2.7% in New York.