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Asian markets drop as China's key index plunges 7.7 percent on credit tightening

Asian markets drop as China's key index plunges 7.7 percent on credit tightening

Asian stock markets sank Tuesday, with China's most-watched index plunging more than 8 percent as investors reacted to the country's latest move to tighten credit and restrain inflation.
Across the region, a combination of negative news left investors staggering.
Wall Street's mixed session overnight was little comfort, particularly following its heavy losses last week. The financial sector added to fears about the U.S. economy, a vital export market, after Lehman Brothers Holdings Inc. posted an unexpectedly large quarterly loss of US$2.8 billion _ its first since 1994.
In China, the government ordered banks to keep more deposits on hand. And oil prices remained near record levels, hovering around US$135 a barrel amid concerns over supplies, growing global demand and other geopolitical issues.
"Investors are concerned about a total meltdown and they just want to get out of the market," said Alex Tang, head of research at Core Pacific-Yamaichi in Hong Kong.
Chinese, Hong Kong and Australia financial markets were closed Monday for national holidays, so Tuesday was the earliest chance for investors to react to Wall Street's Friday steep sell-off, which had already dragged down other regional markets on Monday.
In afternoon trading, the benchmark Shanghai Composite Index was down 257 points, or 7.7 percent, to 3,072. Hong Kong's Hang Seng index was down 4 percent at 23,425, while Australia's benchmark index fell 2.8 percent to 5,437.5.
Investors in mainland China dumped bank and property shares after a weekend decision by the country's central bank to require banks to keep more deposits on hand.
The measure was aimed at easing inflation that is at 12-year highs without unduly slowing the dynamic economic growth needed to create jobs.
It will leave less money available for lending and investment and signaled authorities' intentions to keep credit tight and likely hurting business for financial and real estate companies, among others.
Industrial & Commercial Bank of China shed 5.3 percent and property developer China Vanke tumbled 9.1 percent.
Airlines also fell back on worries over high oil prices, which raise operating costs. Air China lost 8.7 percent and China Eastern Airlines plunged 9.3 percent.
Mainland China's pain spread to Hong Kong, where telecom company China Netcom lost more than 8 percent, while its soon-to-be parent, China Unicom, shed more than 7 percent.
In Australia, stocks were weighed down by both Wall Street's losses and concerns about inflation from U.S. Federal Reserve officials. Financial firms took a big hit, with Macquarie Group and Babcock & Brown both down 7.2 percent, and National Australia Bank falling 4.3 percent.
Elsewhere, Tokyo's Nikkei 225 index closed down 1.1 percent at 14,021.17 after dropping 2.1 percent Monday.
Taiwan's benchmark fell 2.5 percent and South Korea's index sank 1.9 percent.
In India, where the market fell 3 percent Monday, the Sensex index was down another 1.9 percent.
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AP Business Writer Jeremiah Marquez contributed to this report from Hong Kong.


Updated : 2021-06-21 23:45 GMT+08:00