* MSCI Asia ex-Japan falls 0.7 pct, dragged by banks and
* Euro hovers near 4-month low vs dollar
* Assets generally lacklustre ahead of Easter holiday
* European shares likely subdued
By Chikako Mogi
TOKYO, March 28 Asian shares fell on Thursday as
weak euro zone data, a sluggish debt auction in Italy and fears
of a potential run on Cyprus's banks stoked investors' concerns
about instability in Europe.
European markets were seen subdued, with financial
spreadbetters predicting London's FTSE 100, Paris's
CAC-40 and Frankfurt's DAX to open down as much
as 0.3 percent.
Benchmark indices in Spain and Italy were
likely to open flat and 0.3 percent lower respectively.
A 0.4 percent fall in U.S. stock futures pointed to a
weak Wall Street start.
Japan's Nikkei stock average closed down 1.3
percent, as euro zone worries prompted profit taking in
exporters and financials.
The negative tone for Asian equities was compounded by the
latest restrictive move by China, with its banking watchdog
ordering banks to strengthen checks on the underlying assets of
a range of wealth management products to ward off potential
risks to the financial system.
The MSCI's broadest index of Asia-Pacific shares outside
Japan fell 0.7 percent, wiping out the previous
day's gains, which had taken the index to a one-week high.
Thursday is the last trading day for the first quarter for
many Asian markets, which will be closed on Friday for the Good
The pan-Asian index was set for its smallest quarterly gain
since the second quarter last year with a 0.9 percent rise,
which would also be its worst first quarter in four years.
"Multiple factors are denting sentiment, with uncertainties
over the future of Cyprus despite the bailout, Italian political
instability and bad economic indicators from the euro zone,"
said Hirokazu Yuihama, a senior strategist at Daiwa Securities
Despite their recent retracement, Asian shares outside of
Japan have generally stayed in a range for the first three
months of 2013, holding near the upper end close to their
highest levels since August 2011, as improving U.S. economic
growth and hopes China will stay on a recovery track helped
boost investors' risk appetite.
"China's move to tighten property regulations has been the
biggest drag for Asia. Looking ahead, whether China can keep
recovering will be the main issue speficic to this region,"
Yuihama said, adding that Southeast Asian markets may be exposed
to the biggest adjustments if negative news spurred broader
China shares, by far the worst regional performer on
Thursday, were headed for their worst loss in nearly a month,
hurting Hong Kong markets, with banks taking a hit after they
were ordered to tighten control over wealth management products
(WMP) and improve transparency.
Hong Kong shares slid 1.3 percent and Shanghai shares
slumped 2.7 percent.
"The timing of the announcement caught the market by
surprise, although people were already expecting the regulators
to act," said Hong Hao, chief strategist at Bank of
Communication International Securities.
Trading slowed generally as market players closed positions
ahead of the Easter holidays.
"Whatever is happening in Europe in terms of Cyprus and the
ramifications of that, maybe a lot of traders just don't want to
be long or don't want to have positions over this long weekend,"
said Winston Sammut, investment director at Maxim Asset
Cypriots are expected to besiege lenders in the morning as
banks reopen for the first time in almost two weeks.
Authorities imposed restrictions on cash withdrawals and may
curb the use of credit cards abroad to keep a rein on money
flows after the country agreed to a bailout deal that will wipe
out some senior bank bondholders and impose losses on large
In Italy, the government's cost of borrowing over five years
rose to its highest since October at an auction on Wednesday,
reflecting investor wariness over a lack of progress in forming
a new government and worries about Cyprus's bailout.
Meanwhile, data on Wednesday showed confidence in the euro
zone economy fell more than expected in March after four
straight months of gains.
"Headline risks for the euro should persist, although a
positive turn of events in either country would probably come as
a greater surprise given the market's subdued expectations,"
said Vassili Serebriakov, strategist at BNP Paribas.
The euro was at $1.2789, hovering near a four-month
low of $1.2750 touched on Wednesday.
The dollar was down 0.1 percent but still near Wednesday's
7-1/2-month peak of 83.302 against a basket of key currencies
Fears about the euro zone underpinned safe-haven U.S.
Treasuries and gold, while 10-year Japanese government bond
yields fell to 0.510 percent, the lowest level
since June 2003, on expectations strong stimulus measures will
be announced by the Bank of Japan next week at its first policy
meeting under new leadership.
Such anticipations drove the BOJ's benchmark interest rate
down on Wednesday to 0.059 percent, the lowest since since July
13, 2006, which was one day before the central bank ended its
policy to keep the overnight call rate effectively at zero
U.S. crude futures rose 0.2 percent to $96.77 a
barrel while Brent added 0.3 percent to $110.
London copper eased 0.2 percent to $7,590.50 a
tonne, with prices set to end the month and quarter down due to
a lack of robust Chinese demand.