Shanghai stocks tumble to lead most of Asia down

HONG KONG (MarketWatch) � Chinese shares tumbled to lead a broad decline for major Asian markets Wednesday, with the Shanghai benchmark suffering this year�s worst percentage loss so far, led by mining and metal stocks.

On mainland bourses, the Shanghai Composite CN:000001 tumbled 2.7%, its worst loss since late November, to finish at 2,284.88, while the Shenzhen Composite slumped 4.1% to 909.58. Hong Kong�s Hang Seng Index HK:HSI �lost 0.8% to 20,885.42.

�State enterprises� combined earnings are going down. This is relatively new, so sellers are using that as an excuse to drag down the market,� said Steve Cheng, associate director at Shenyin Wanguo. The selling might also be an effort by institutional investors to lock in profits before the end of the first quarter, he added.

Elsewhere, Japan�s Nikkei Stock Average JP:100000018 �fell 0.7% to 10,182.57 and South Korea�s Kospi KR:SEU �lost 0.4% to 2,031.74, giving back some of gains recorded the previous day on hopes U.S. monetary policy will remain accommodative.

Going the other direction, Australia�s S&P/ASX 200 index AU:XJO rose 1% to 4,343.50 � a closing level not seen since Nov. 9. Taiwan�s Taiex XX:Y9999 �added 0.1% to 8,038.07.

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How important are consumer confidence data, what is their relationship to stock market levels? Photo: Bloomberg News.

The losses on mainland bourses came a day after data from the National Bureau of Statistics showed a 5.2% drop in profits for China�s largest industrial groups during the first two months of the year.

Mining and metal stocks were hit hard. Yanzhou Coal Mining Co. YZC � CN:600188 fell 5.6% and Jiangxi Copper Co. JIXAY �HK:358 �CN:600362 �fell 5.5% in Shanghai, while Yunnan Tin Co. CN:000960 �shed 7.7% and Hebei Iron & Steel Co. CN:000709 �declined 4.2% in Shenzhen.

The losses also weighed in Hong Kong, where Jiangxi lost 2.4% and Aluminum Corp. of China Ltd. ACH �HK:2600 �gave up 2.1%. Jiangxi�s losses came after it reported a 33% increase in annual profit, but missed analyst forecasts. Read more on Jiangxi earnings.

Also weighed by weak earnings reports, Gome Electrical Appliances Holding Ltd. HK:493 � GMELF �slumped 21.2% after the appliance retailer said Tuesday that higher costs limited its 2011 net-profit rise to just over 6%, also falling short of expectations. The performance earned a stock downgrade to underperform from outperform from Macquarie.

Merchandise sourcing and supplying firm Li & Fung Ltd. HK:494 LFUGY �dropped 5.2% after raising $501 million via a share placement. See report on Li & Fung share placement.

In Tokyo, shares of Sharp Corp. JP:6753 �SHCAY soared by the day�s 16.3% limit following reports that Hon Hai Precision Industry Co. TW:2317 HNHAF �is buying a 10% stake in the Japanese firm for 66.91 billion yen ($806 million). Read more on Sharp-Hon Hai deal.

�The Hon Hai Group�s roster of customers should be a strong asset for Sharp,� analysts at Nomura Securities wrote in a report. �We think Hon Hai would like to leverage Sharp�s strength in large-size panels to bid Apple Inc.�s AAPL iTV project.�

Shares of Hon Hai jumped 4.6% in Taipei, also aided by better-than-expected quarterly results announced Tuesday, to support the broader market. See report on Hon Hai earnings.

South Korean liquid crystal display makers declined following the reports. Samsung Electronics Co. SSNLF �dropped 0.7%, while LG Display Co. LPL �fell 4.9%.

Recent yen weakness also helped lift other exporters, with Toyota Motor Corp. JP:7203 TM �rising 1.8% and Nissan Motor Co. NSANY �JP:7201 �gaining 1%.

Sony Corp. JP:6758 �SNE �gained 2.5% after a Nikkei business news report that its money-losing television business would be placed under the direct control of the company�s new chief executive officer.

In Sydney, gold miner Newcrest Mining Ltd. AU:NCM � NCMGF �rose 2.9% and Fortescue Metals Group Ltd. AU:FMG FSUMF �added 2.1%.

Banks were also higher, with Westpac Banking Corp. AU:WBC WEBNF �up 1% and National Australia Bank Ltd. AU:NAB NAUBF �1.1% higher.

Peter Esho at City Index in Sydney said that the Australian benchmark index closed over the key 4,300 level on Tuesday, and the market was possibly experiencing some technical buying Wednesday.

�We�re seeing a lot of beaten-down names doing well today,� he said.