Chinese Stocks Hit Three-Week, While Nikkei Gains

A Wall Street Journal Roundup

China's shares fell to nearly a three-week low Friday, led by property firms and banks as growing concerns about inflation raised the prospect of Beijing introducing possible new monetary-tightening measures.

The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 1.2% at 3013.41, its lowest point since Feb. 23. The index fell 0.6% for the week.

Analysts said the Shanghai index faces immediate psychological support at 3000, though that could change if the central bank introduces further tightening measures.

China Vanke fell 1.5% and Poly Real Estate declined 1.6%. The property sector is particularly sensitive to credit-tightening measures, analysts said.

Banks and steel mills also fell, as a tightened lending environment would hurt their earnings prospects. Shenzhen Development Bank fell 3.1% and Shanghai Pudong Development Bank slipped 1.2%. Baoshan Iron & Steel dropped 2.1% and Wuhan Iron & Steel fell 1.9%.

In Hong Kong, Air China jumped 11% after the Chinese flag carrier said it plans to raise 5.6 billion yuan ($820 million) through an A-share private placement and will use all the proceeds to supplement its working capital. But concerns about increased share supply hurt the stock in Shanghai, where it fell 4.1%.

Around Asia, shares ended mixed but most major indexes moving less than 1%.

In Tokyo, exporters helped the market extend gains. Japan's Nikkei Stock Average of 225 companies rose 0.8% to 10751.26, its highest close since Jan. 21.

The Nikkei was among the best performers in the region for the week, with gains of nearly 3.7%. "Given ongoing foreign buying and expectations for improving corporate earnings for the next fiscal year, the Nikkei could rise further," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

Exporters pushed higher on expectations of a weaker yen. Nikon and Nissan Motor both gained 2.4%, while Olympus rose 1.4%.

Machinery maker Fanuc climbed 1% after Deutsche Bank raised the stock to "buy" from "hold," citing its rising exports to China.

Generic-drug makers rallied, with Sawai Pharmaceutical rising 3.4% and Towa Pharmaceutical gaining 2.6% after Morgan Stanley said the sector could start gaining ground when the government's additional measures to promote increased pharmacy prescriptions begin to bear fruit. Credit Suisse also raised Sawai's rating to "outperform."

On the downside, Mitsui Chemicals lost 1.5% on news related to a temporary suspension of its ethylene plant near Tokyo.