Asian stocks fall in thin choppy trade

Tuesday, 21 December 2010 00:01 - - {{hitsCtrl.values.hits}}

SYDNEY (Reuters) - Asian shares fell to their lowest in over a week on Monday, led by a 2 percent slide in Shanghai stocks as thin year-end trading made for exaggerated moves, not helped by mounting tensions on the Korean peninsula.

The euro slipped to a two-week low after last week’s massive five-notch credit rating downgrade of Ireland by Moody’s and euro zone leaders failed to reassure markets on how they will tackle the debt crisis in the short term.

With the year-end holidays looming, buyers were hard to be found, having taken profits since Asian stocks hit 2- year highs last week.

Asia Pacific stocks, as measured by MSCI fell 0.5 percent, having earlier dropped to lows not seen since December 8, while the index excluding Japan shed 0.8 percent.

Despite threats of war by Pyongyang, South Korea on Monday launched live firing drills on a disputed island after an emergency U.N. Security Council meeting failed to agree on how to defuse the crisis.

Share markets from Australia to Singapore were all in the red with Japan’s Nikkei down 0.8 percent, Hong Kong’s Hang Seng index down 1.0 percent and South Korea’s KOSPI 0.7 percent lower. Shanghai’s stock index fell 1.8 percent, having earlier slid about 3 percent.

“We see a typical year-end money crunch plus jitters over continued PBOC tightening and consequently a lackluster market performance until early next year,” said Shanghai Securities senior trader Zheng Weigang.

Technically, the fall in the Shanghai Composite Index to below its 250-day moving average indicates the market may struggle in the near term.

Even major miners like BHP Billiton erased gains to close lower on the day as support from higher commodity prices faded.