China deficit slows Asian markets

Asian stock markets were mostly lower today after China’s trade figures underlined a slowdown in the world’s number two economy.

Hong Kong’s Hang Seng fell 0.4% to 21,001.87 and South Korea’s Kospi lost 0.7% to 2,004.24.

Australia’s S&P/ASX 200 fell 0.3% to 4,199.80. Benchmarks in Shanghai, Taipei and Manila were also lower but Japan’s Nikkei 225 index rose 0.3% to 9,960.79.

On Saturday, China reported its biggest monthly trade deficit in at least a decade in February as imports rebounded after a Lunar New Year holiday slowdown in January, but the combined figures for both months showed growth in imports and exports decelerating markedly.

January-February export growth slowed to 6.9% over the same two-month period last year, barely half of December’s 13.4% rate.

Imports for the two months rose 7.7%, down from December’s 11.8%.

The numbers suggest China’s manufacturers are being hit by weaker overseas demand amid Europe’s debt crisis.

Weaker growth in Chinese imports, meanwhile, could have a ripple effect throughout Asia.

Investment sentiment was also tempered by news that Greece’s debt reduction deal with private creditors could cause losses for banks after the International Swaps and Derivatives Association, the private organisation that rules on such cases, ruled that a “restructuring credit event” occurred.

That means Greece’s debt relief will trigger payouts of so-called credit default swaps, a type of insurance on bonds.

But the ISDA said overall payouts will be significantly below the 3.2 billion US dollars in net outstanding credit default swap contracts linked to Greece.

The exact level of payouts will be determined on March 19.

“Officials in Europe are set to finalise Greece’s second bailout today but market sentiment is unlikely to be boosted as various concerns creep into the market,” analysts at Credit Agricole CIB in Hong Kong said in a report.

A multibillion euro bailout, which Greece needs to avoid imminent bankruptcy, was contingent upon the successful completion of the debt restructuring deal.