Asian shares fall on S. Korea, Japan bank report

Asian markets plunged Thursday on growing fears of a regional slowdown after South Korea unexpectedly cut interest rates, and Japan's central bank failed to make major policy changes to boost growth. The news spooked investors, who were already nervous a day before China releases key data expected to confirm slowing growth in the world's second-biggest economy. Tokyo fell 1.48 percent, or 130.99 points, to end at 8,720.01, while Seoul closed down 2.24 percent, or 41 points, at 1,785.39. Hong Kong stocks closed 2.03 percent, or 394.76 points, lower at 19,025.11, amid concern over the Chinese economy. But Shanghai ended up 0.46 percent, or 10.11 points, at 2,185.49, on hopes of government action to stabilise growth. Sydney fell 0.70 percent, or 28.5 points, to end at 4,068.0 after weak June jobs figures. By cutting its key interest rate 25 basis points to 3.00 percent, South Korea's central bank joined an international drive to ease the impact of the eurozone debt crisis that threatens export-dependent Asian economies. The bank said in a statement the domestic economy was under pressure "due mostly to the increase in euro area risks and the sluggish economies of its major trading partners". The reduction was the first since February 2009, when the key rate hit a record low of 2.00 percent. The European Central Bank and China's central bank cut their rates last week, while Brazil on Wednesday slashed its rate to a record low. But the Bank of Japan took no major steps despite lowering its growth forecast for the fiscal year, to 2.2 from 2.3 percent, surprising some analysts. Following a two-day policy meeting, the bank said it would keep rates steady at zero to 0.1 percent and fine-tuned a 70 trillion yen ($880 billion) asset-purchase programme but kept the size of the policy tool steady. The bank said it would reduce the amount of fixed-rate loans it offers by five trillion yen and increase the purchase of treasury discount bills by the same amount, but analysts said the move would have little effect. Although expectations of major action by the bank had been waning, analysts were disappointed given the recent moves by other central banks. "After rate cuts by Korea and Brazil, it's just odd that the BoJ is not playing ball like everyone else," said Hideyuki Ishiguro, strategist at Okasan Securities in Tokyo. "Stock investors feel that the BoJ is too tentative, too little, and too late on policy, and that it lacks a sense of duty to support the market," he told Dow Jones Newswires. Asian stocks slipped in early trade, following a lead in the US after the minutes of the Federal Reserve's June meeting showed the rate-setting committee split on whether to provide more stimulus. Several top policymakers urged the central bank to look at new tools to bolster the financial system amid a weak recovery, but the minutes also showed the Fed split on how, when and if to provide more stimulus. The Dow Jones Industrial Average finished down 0.38 percent. The flood of news from the region overshadowed developments in the eurozone, where optimism about an austerity package in Spain was largely offset by worries that Italy may have to tap a eurozone rescue fund, dealers said. On currency markets, the euro slipped against major currencies in early European trade. It bought $1.2217 and 96.90 yen, from $1.2238 and 97.58 yen in New York late Wednesday. The dollar weakened to 79.31 yen from 79.74 yen in New York. Gold was worth $1,566.81 an ounce at 0930 GMT, compared with $1,578.20 late Tuesday. In other markets: -- Taipei fell 1.75 percent, or 126.98 points, to 7,130.93. Taiwan Semiconductor Manufacturing Co lost 3.07 percent at Tw$75.7 while Hon Hai Precision slipped 3.11 percent to Tw$87.1. -- Wellington rose 0.65 percent, or 22.56 points, to 3,501.40. Telecom Corp. was up 2.2 percent at NZ$2.58 after rival TelstraClear was sold to Vodafone, and market heavyweight Fletcher Building held steady on NZ$6.09. -- Manila slipped 0.58 percent, or 0.25 points, to 5,205.19. Philippine Long Distance Telephone Co. shed 0.3 percent to 2,698 pesos and conglomerate Ayala Corp. slid 4.3 percent to 457.60 pesos.