Australia leads Asian share markets lower

Australia was one of the worst performing markets in Asia Pacific on Tuesday as the central bank cut interest rates to a 49-year low and signalled that the first economic downturn since 1991 was on its way.

Overall the region's stock markets fell, ending a four-day long rally, after taking their cue from Wall Street's drop overnight on worries about banks. The FTSE Asia-Pacific index dropped as much as 0.7 per cent although it had narrowed the losses to around 0.2 per cent by late afternoon in Hong Kong.

The Reserve Bank of Australia cut its overnight cash rate for the sixth time in eight months to lower the cost of borrowing by 25 basis points to a record low of 3.0 per cent.

Lower commodity prices and the prospect of an increase in bad loans also conspired to send the S&P/ASX 200 index in Sydney 1.3 per cent lower to close at 3,706.30.

Rio Tinto, the world's third-biggest mining company, dropped 10.0 per cent to A$53.18 as press reports stoked speculation it would sell an additional $8bn of shares if Aluminum Corporation of China, or Chinalco, failed to invest in the company.

Westpac Banking led a decline in the financial sector. It dropped 1.9 per cent to A$20.30, Macquarie fell by 4.9 per cent to A$29.49.

Bendigo & Adelaide Bank fell by 6.5 per cent to A$6.91, adding to Monday's 8.2 per cent fall, after cutting its profit forecast.

However, retailers did well. Woolworth rose by 1.4 per cent to A$25.57 and Wesfarmers gained 0.8 per cent to A$19.24.

Australia's biggest telecom operator, Telstra, rose sharply following the government's decision to seek private partners for an A$43bn high-speed national internet network.

Telstra rallied 4.4 per cent to a one-month closing high of A$3.35 as investors hoped the company would get a second chance to invest in the broadband network, after its earlier proposals were rejected.

In Japan, the Nikkei 225 average closed 0.3 per cent lower at 8,832.85 although broader Topix index ended 0.2 per cent higher at 832.60.

The yen retreated from its weakest levels in five months to strengthen by 0.6 per cent to Y100.40 against the dollar. The Bank of Japan said it would keep its benchmark interest rate steady at its history low of 0.1 per cent.

Property developers and construction companies gained on hopes that the government would spend more on infrastructure. Penta-Ocean Construction rose by 5.1 per cent to Y123 and Mitsui Fudosan closed 1.6 per cent higher at Y1,297.

Carmakers seemed unworried by the yen's appreciation. Honda Motor rose by 2.2 per cent to Y2,805 and Mazda, which is partly owned by Ford of the US, rose by 6.6 per cent to Y227.

Weaker crude prices depressed Inpex, Japan's biggest oil explorer, by 2.4 per cent to Y728,000. Cosmo Oil fell by 2.4 per cent to Y290.

Hong Kong shares drifted lower but their losses were offset by a rally in shares of mainland banks, which were expected to announce good profits after a big rise in lending in the first quarter of the year.

The Hang Seng index closed 0.5 per cent lower at 14,928.97 and the main sub-index of mainland companies listed in the territory was 0.4 per cent lower at 8,772.65. On the mainland itself, the Shanghai composite index closed 0.8 per cent higher at 2,439.18.

Industrial & Commercial Bank of China, the world's biggest by stock market value, rose by 1.7 per cent to HK$4.26 and China Construction Bank gained 1.3 per cent to HK$4.72.

However, HSBC, which has just completed a ?12.5bn rights issue, fell by 1.6 per cent to HK$51.20.

Elsewhere, South Korea's Kospi closed 0.2 per cent higher at 1,300.10 and in Singapore, the Straits Times Index was 2.6 per cent lower late in the afternoon session at 1,799.46.

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