Asian Shares Slip On China Hopes, Spanish Credit Concerns - Wall Street Journal

-- Asia shares fall on Xinhua report, Spanish banks

-- Nikkei down 0.9%, Hang Seng Index 1.9%, S&P ASX 0.8% lower

-- Japan's Marubeni falls after acquisition

(Updates prices, adds information on companies affected by stimulus report)

By Daniel Inman

Of DOW JONES NEWSWIRES

HONG KONG (Dow Jones)--Asian shares fell Wednesday as hopes for a large Chinese stimulus package were dashed following a report in the state-run news media and as concerns about Spanish banks resurfaced.

Hopes for a Chinese stimulus package, which was partly responsible for a rally in Asian stocks on Tuesday, were moderated by a Xinhua News Agency analysis saying the government would not launch anything on the scale of its 2008 stimulus plan.

Xinhua said that there "won't be any massive stimulus plan to achieve a high growth." Although the government has introduced a series of measures--such as project approvals, tax approvals and special subsidies for the purchase of household appliances--the measures are "notably different" from the infrastructure heavy intervention taken after the global financial crisis.

Chinese stocks fell on the news, with Hong Kong's Hang Seng Index down 1.9%, eliminating the gains made in the previous two sessions, while the Shanghai Composite fared better, down just 0.1% down.

Japan's Nikkei was 0.9% lower, Australia's S&P ASX 200 dropped 0.8%, and South Korea's Kospi retreated 0.9%.

Asia shrugged off the strong trading in the U.S. overnight. Investor concerns rose over Spain after its credit rating was downgraded by Egan-Jones Ratings. This helped push the euro down to its lowest level against the dollar since July 2010. The single currency was at $1.2503 late in New York, falling even further to $1.2466 in Asian trading.

The Spanish financial system suffered another blow after the European Central Bank signaled opposition to any attempt to fund Spain's EUR19 billion ($23.7 billion) Bankia recapitalization through the central bank's lending facilities.

"There is this ongoing concern about the Spanish banking system and what kind of bailout it could need," said Tim Waterer, senior trader at CMC Markets in Sydney.

Poor economic data in Australia pushed the Australian dollar down sharply against the U.S. unit. Retail sales fell 0.2% in April, against an expected rise of 0.2%, and the value of building work completed in the first quarter fell 0.5%. The Australian dollar dropped to 0.9776, recovering slight to 0.9792 later in the day.

Chinese infrastructure companies fell on the Xinhua report, especially companies involved in the construction of railways such as China Railway Construction, which dropped 3.6% in Hong Kong. Chinese resource companies, which led Tuesday's rally on the hopes of a stimulus, also dropped in Hong Kong. Coal companies China Shenhua and China Coal were down 1.7% and 1.8% respectively, while aluminum producer Chalco dropped 0.9%.

The effect of the news was felt outside China, as Japanese manufacturers of construction equipment underperformed the Nikkei, with Komatsu dropping by 2.7% and Hitachi Construction Machinery down 3.1%.

Also in Japan, Marubeni slumped 4.5% after the trading company announced on Tuesday that it would buy Gavilon Group, the U.S.'s third-largest grain handler for $3.6 billion excluding debt, as investors reacted badly to a deal that will be partly funded by bank borrowing.

-By Daniel Inman, Dow Jones Newswires; Daniel.Inman@wsj.com

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