Asian stocks neared four-month lows on Monday as investors fretted over China's plans to temper growth and a Federal Reserve meeting that could pave the way for a U.S. rate rise. Holidays in Japan, China and much of Southeast Asia sapped currency trade, leaving the dollar little changed. Oil firmed on worries that shootings at a chemicals plant in Saudi Arabia could herald further attacks. Concern that Beijing's pledge to cool red-hot economic growth would crimp demand for its regional neighbours' exports sent Taiwan stocks sliding as much as two percent before they rebounded sharply. Concern about China also dented the Hong Kong and Australian markets. South Korea's biggest chemicals maker, LG Chem Ltd <051910.KS>, sank five percent because its industry sends half its exports to China. Expectations that a Fed meeting on Tuesday will set the stage for a rate rise many expect in August also undermined shares.
No one expects the U.S. central bank to raise rates from their 46-year low of one percent on Tuesday. But Fed watchers said a post-meeting statement needed to bow to recent strong economic data and free the Fed's hand for eventual action. "I think there will be quite a rewrite and I think it will prepare us for the inevitable," said Greg Valliere, an analyst with Schwab Soundview Capital Markets in Washington. An MSCI index of Asia-Pacific shares outside Japan <.MSCIAPJ> fell 0.4 percent by 0200 GMT to almost match a four-month low hit on Friday. Taiwan <.TWII> eased 0.1 percent and Hong Kong <.HSI> and Australia <.AXJO> were 0.6 percent weaker. Singapore <.STI> was off 0.4 percent but South Korea <.KS11> gained a third of a percent.
CALL FOR LOAN CONTROLS
China's banking regulator told banks on Friday they should control loans to fast-growing sectors such as steel, cement, property and autos. "On the one hand, U.S. stocks were weak and, on the other hand, investors closely watched the impact on industrials after China's comments to slow economic growth," said Kevin Lin, asset manager at Taiwan's Shinkong Investment Trust. U.S. stocks will take their cue from the Fed meeting after sliding on Friday. The Dow Jones industrial average <.DJI> fell almost half a percent on Friday and the Nasdaq Composite <.IXIC> sank two percent, wrapping up the tech-biased index's worst week in two years. The dollar's recent rally was starting to show signs of fatigue ahead of the Fed statement and U.S. payrolls data on Friday. While higher U.S. interest rates would be a positive for the dollar, analysts warn it would be a concern for the currency if inflation is the impetus for the Fed to increase rates. "Our economists expect that the FOMC (Fed) will drop the word 'patient' from their statement on Tuesday, and a failure to do so would likely see the market conclude that a June rate hike is unlikely," said Ashley Davies, foreign exchange strategist at UBS. The euro was trading at around $1.1964 compared with $1.1975 in New York on Friday. Against the yen the dollar was 110.25 yen versus 110.43 in New York. U.S. oil rose 0.2 percent to $37.45 a barrel on worries that a weekend shooting at a chemicals plant in Saudi Arabia may spread to the country's vital oil sector and disrupt supplies from the world's top exporter. Gold firmed to $388.75 from $387.20 on Friday. Japanese markets are closed until Thursday. The UK is also on holiday on Monday.///www..com