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HONG KONG : Asian stocks closed sharply lower on Tuesday with regional benchmarks following Wall Street's lead and Shanghai grabbing the spotlight after taking a serious beating.
Rising oil prices amid tensions over Iran's nuclear ambitions had led New York lower and with many Asian markets having traded at record or multi year highs, profit taking set in during early trade.
This resulted in Tokyo shedding 0.52 percent. Sydney was down 0.83 percent, Wellington fell 0.27 percent, Seoul shed 1.05 percent and Manila slumped 1.44 percent.
However, selling elsewhere gathered steam in late afternoon trade when institutional investors severely punished Shanghai amid beliefs its shares are substantially overvalued, resulting in a 8.84 percent tumble.
Dealers said a sell-off that caused over 800 companies to close down their daily limits of 10 percent, with banks, steel and auto stocks hit hard, highlighting growing concerns that the Shanghai market looked increasingly risky.
This directly impacted on Hong Kong which fell 1.76 percent, Kuala Lumpur slumped 2.81 percent, Singapore was 2.29 percent lower, Jakarta was down 1.11 percent and Bangkok fell 0.69 percent.
"The 8.0 percent falls in the China market strongly dampened local market sentiment, and further dragged down the benchmark index," said Peter Lai, sales director at DBS Vickers in Hong Kong.
"China financials saw strong selling pressure," he noted.
Lai said the mainland bourses were hit by institutional selling as the lock-up periods for some stocks has ended.
"Investors are also worrying about further macro-economic measures by the Chinese government, which provided a good excuse for selling," he added.
Mainland analysts also cited fears that the China markets will see major volatility after the launch of index futures there, which is expected in the first half of the year.
Mumbai was down 1.25 percent, one day ahead of the government release of its annual budget.
Dealers said weak Asian markets and concerns over high inflation in the fast-growing Indian economy saw investors trim existing positions.
The 30-share Sensex index fell 170.69 points to 13,478.83.
India's economy has "taken off" but rising prices remain a key worry, the government said in its annual report card of the economy released on Tuesday.
"The markets await fresh direction tomorrow where tax reform and measures to raise rural infrastructure spending will be in focus," said Hiten Mehta, fund manager at Fortune Financial Services on Tuesday. - AFP/ch
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