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Asia stocks drop on growth outlook fears

HONG KONG (MarketWatch) -- Asian markets skidded Friday as signs of a slowing world economy and a ratings downgrade of several major banks pushed investors away from risk assets before the weekend.

Resource sector stocks in particular tumbled after crude-oil prices (CLQ2) below $80 a barrel and gold futures (GCQ2) under $1,600 an ounce overnight in New York, with banks and other financial stocks also taking big losses.

"The economic indicators are not going to be good for the rest of the year. Manufacturing activity in Europe and China is weak, and the economies are slowing down. But [Asian markets] had a good rebound in June, so a pull-back is normal given what happened in U.S. markets overnight," Linus Yip, strategist at First Shanghai Securities in Hong Kong said.

South Korea's Kospi (SEU) was the region's worst performer of the day, dropping 2.2% as wary investors sold stocks across sectors.

Japan's Nikkei Stock Average (100000018) slipped 0.3%, Taiwan's Taiex (Y9999) gave up 0.8% and Australia's S&P/ASX 200 index (XJO) shed 1%.

Hong Kong's Hang Seng Index (HSI) dropped 1.4%, extending losses after European markets opened sharply on the downside. Mainland Chinese markets were closed for a holiday.

The performance brought a mixed week to an end for the regional indexes, with Japan's Nikkei the best performer among the five benchmarks mentioned above, with a 2.7% advance. The Hang Seng Index dropped 1.2%, while the Shanghai Composite had ended Thursday's session with a weekly loss of 2%.

Friday's soft performance in Asia came after a hefty sell-off on Wall Street, with regional stocks under selling pressure even as Dow Jones Industrial Average (DJIA) futures rose in Asian trading, pointing to a likely higher opening.

In addition to concerns over the growth outlook, independent stress tests of Spanish banks revealed capital needs for financial institutions in an adverse scenario could be as high as 62 billion euro ($78.8 billion). And after the U.S. markets' close, Moody's Investor Service downgraded 15 global banks citing volatility and risks in capital markets.

Yip said the correction was also tied to disappointment with the Federal Reserve's failure to announce more aggressive stimulus measures this week.

Financials were weaker across Asia. In Hong Kong, HSBC Holdings PLC(5) (HBC) , one of the banks downgraded by Moody's, dropped 1.2%.

Among other banks, Agricultural Bank of China Ltd. (1288) (ACGBY) shed 1.3% in Hong Kong, while Australia & New Zealand Banking Group Ltd. (ANZ) (ANZBY) lost 1.4% in Sydney, KB Financial Group Inc. (KB) lost fell 3.7% in Seoul and Chinatrust Financial Holding Co. declined 2% in Taipei.

Resource firms were pressured throughout the region.

In the energy sector, Tokyo-listed Inpex Corp.(1605) (IPXHY) sank 2.5%, Santos Ltd. (STO) (SSLTY) dropped 2.2% in Sydney and CNOOC Ltd. (CEO) (883) dropped 4% in Hong Kong.

Shares of Newcrest Mining Ltd. (NCM) (NCMGY) tumbled 3%, while Zhaojin Mining Industry Co. (ZHAOF) (1818) skidded 3.1% in Hong Kong after the drop in gold prices.

Elsewhere in the resources sector, BHP Billiton Ltd. (BHP) (BHP) lost 2.1% and Rio Tinto Ltd. (RIO) (RIO) declined 1.6% in Sydney, Korea Zinc Co. retreated 3.3% in Seoul and Hong Kong-listed China Coal Energy Co. (1898) (CCOZY) skidded 3.4%.

Global growth concerns hurt exporters across Asia. Fashion retailer Esprit Holdings Ltd. (330) (ESPGY) fell 2.5% in Hong Kong, Samsung Electronics Co. (SSNGY) tumbled 3.7% and Hyundai Motor Co. (HYMTF) shed 3% in Seoul and Tokyo-listed Suzuki Motor Corp. (7269) (SZKMY) declined 2.7%.

But a relatively soft yen lent support to some blue-chip names in Tokyo.

Sharp Corp. (6753) (SHCAY) rallied 2.4% and Fujifilm Holdings Corp. (4901) (FUJIY) put on 1.7%, as the dollar (USDJPY) traded above the ¥80 level, and the euro (EURJPY) over ¥100(EURJPY) .

Olympus Corp. (7733) (OCPNY) shares gained 2.2%, after the Nikkei reported the firm is entering final stage talks for a near 50 billion yen ($625 million) investment from Sony Corp. (6758) (SNE) in an attempt to rebuild the company from last year's accounting scandal.

Sony stock rallied even more, gaining 5.6%. Read more on Sony's potential Olympus investment.

A separate Nikkei report said Sony is close to agreeing to a technology alliance for television panels with Panasonic Corp. (6752) (PC) . Panasonic shares finished 1.5% higher.