Asian Shares Fall; Concerns On China Bank Lending

Australia's S&P/ASX 200 was down 2.5% with Japan's Nikkei 225 down 2.1% and South Korea's Kospi Composite off 0.4%. Hong Kong's Hang Seng Index was down 1.3%, with Taiwan shares off 0.1%.
The Shanghai Composite Index was 0.7% higher by the market interval there, though off its morning highs.
Traders cited a report by Bloomberg which quoted people familiar with the matter as saying China planned to tighten capital requirements for banks. It said the China Banking Regulatory Commission had sent a draft of rule changes to banks on Aug. 19, requiring them to deduct all existing holdings of subordinated and hybrid debt sold by other lenders from supplementary capital.
There's little in the way of concrete data, but many China-watchers believe a large amount of bank lending has found its way into the stock market in recent months.
Concerns that China might slow this lending flood, at a time doubts are starting to come in about the strength of the economic recovery, were felt also in currency trade, with the U.S. dollar falling against the Japanese yen to its lowest level in more than a month.
The yield on the U.S. 10-year Treasury note fell to 3.38% in Tokyo, from 3.43% earlier, another indication of risk aversion. U.S. stock futures were down in screen trade, with Dow Jones Industrial Average futures falling 58 points.
Investors were likely to take their cue from where Shanghai shares headed in the afternoon session, given offshore market players tend to view that bourse as a bellwether for sentiment on the Chinese economy.
"In the last two weeks the index has lost more than 20% of its value - and needless to say investors are wondering if this is once again a harbinger of a sharp turn in China's real economic fortunes," said UBS economist Jonathan Anderson.
In Hong Kong, China Mobile was down 3.6% and responsible for a fair bit of the HSI's fall. That was after the company's first half results late Thursday showed a slowdown in profit growth.