Asian Shares End Lower; Yen Strength Hurts Japan Exporters

SINGAPORE (Dow Jones)–Asian stock markets were mostly lower Wednesday as renewed concerns over the health of European banks hurt sentiment. Exporter shares dragged the Tokyo market lower as the yen touched a fresh 15-year high against the U.S. dollar.

Japan’s Nikkei Stock Average dropped 2.2%, Australia’s S&P/ASX200 shed 0.8%, South Korea’s Kospi lost 0.5%, Hong Kong’s Hang Seng Index declined 1.5% and China’s Shanghai Composite slipped 0.1%.

Financial shares were weak around the region, tracking losses in their European and U.S. counterparts, as investors’ attention refocused on the fiscal health of various European nations, especially Ireland, Portugal and Greece.

The Wall Street Journal Tuesday reported that stress tests of European banks earlier this year understated some lenders’ holdings of potentially risky government debt.

“Investors have quickly forgotten the disbelief and skepticism when the U.S. bank stress tests results were released in May 2009,” said NRA Capital Chairman Kevin Scully, and added that the latest stress-test concerns were overrated.

He said the outcome of the U.S. bank stress test enabled lenders to recapitalize using private-sector resources and led to a rally in U.S. financial stocks. “I expect the same will apply to the EU banks as well.”

National Australia Bank dropped 1.8% in Sydney, Japan’s Mitsubishi UFJ Financial Group shed 1.7% in Tokyo, HSBC Holdings’ Hong Kong-listed shares shed 1.3% and South Korea’s Shinhan Financial Group fell 2.0%.

In Japan, sentiment soured toward the nation’s exporters as the Japanese yen soared to a new 15-year high against the U.S. dollar before giving back some ground in late Asian trading. The dollar hit a fresh 15-year low of Y83.34, and was at Y83.71 from Y83.80 late in New York trade. The euro was at Y105.91 from Y106.33 in New York and at $1.2663 from $1.2687.

The yen rallied despite Finance Minister Yoshihiko Noda’s comments Wednesday that the government will take “decisive” steps against the rising yen, if necessary, and that those measures included foreign-exchange market intervention. It was the first time Mr. Noda has mentioned that currency-market intervention was a policy option.

“Japan’s situation is particularly grim amid the possibility the yen may strengthen further,” said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets. “Expectations are slim that the government will intervene in currency markets,” unless the U.S. dollar falls below Y83, he said.

Pacing the decline, Toyota Motor Corp. shed 2.1%, Honda Motor lost 2.5% and Sony Corp. gave up 2.2%.

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