Shanghai index drops on China tightening worries

Asian stock markets ended mostly lower yesterday, with Chinese stocks extending their recent heavy losses on worries Beijing may unveil more tightening measures to restrain prices.

Japan’s Nikkei Stock Average ended 0.1% higher, Australia’s S&P/ASX 200 lost 1.6%, South Korea’s Kospi slipped 0.1% and Taiwan’s Taiex gave up 0.7%.

Hong Kong’s Hang Seng Index declined 2.0%, while China’s Shanghai Composite dropped 1.9%.

Markets in Malaysia, Singapore, Indonesia and India were closed for a public holiday.

Commodity-linked shares were hit across the region as European sovereign debt troubles reined in risk appetite and pushed the US dollar higher against major global currencies. Copper, zinc, natural rubber and aluminum futures fell sharply on the Shanghai Futures Exchange.

BHP Billiton dropped 2.2% and Rio Tinto fell 3.2% in Sydney, Mitsubishi Materials lost 4.0% in Tokyo and Korea Zinc lost 2.9% in Seoul. In Shanghai, Jiangxi Copper dropped 2.9%, PetroChina and Zijin Mining Group each lost 1.9%, and Datong Coal Industry lost 3.0%. In Hong Kong, Jiangxi tumbled 8.2% and PetroChina skidded 3.3%.

Selling continued in China on worries that Beijing could impose price controls, after the state-run Xinhua news agency cited Premier Wen Jiabao as saying the State Council was drafting measures to curtain sharp increases in prices of commodities that affect people’s immediate interests.

Cement stocks and heavyweight oil plays dropped as investors retreated to the sidelines. Anhui Conch Cement declined 6.2%, Tangshan Jidong Cement fell 3.0%, while PetroChina fell 1.9% and Sinopec declined 2.1%.

Cathay Pacific Airways ended 0.4% lower in a downbeat Hong Kong market, but continued to outperform after its positive fiscal-year earnings forecast on Monday.

Newly listed Shirble Department Store Holdings fell 17.7% to HK$1.81 on its first day of trading, pressured by poor broad market conditions.

In Tokyo, Mazda Motor advanced 3.1% after the Nikkei reported that about 10 firms have decided to buy a large portion of Ford Motor’s 11% stake in the Japanese automaker.

In Sydney, Qantas Airways lost 2.2% as concerns persist about the airline’s technical issues. On Tuesday, a 747 jet en route to Argentina was forced to return to Sydney after problems with the aircraft’s electrical system, the latest in a string of mid-air incidents which have plagued the carrier in recent weeks.

In Seoul, Tuesday’s news that Hyundai Group was chosen as the preferred bidder for a controlling stake in Hyundai Engineering & Construction continued to weigh on some stocks, as investors worried Hyundai Group will have to borrow heavily for the acquisition. Hyundai Engineering & Construction lost 4.8% and Hyundai Merchant Marine-an affiliate of Hyundai Group-stumbled 9.6%.

Hyundai Motor, which lost out to Hyundai Group as the preferred bidder, rose 2.8%, on relief that the distraction of the bidding process was now over.

Elsewhere in the region, New Zealand’s NZX 50 fell 0.8%, Philippine shares ended 1.7% lower and Thailand’s SET gave up 1.1%.