* Historic, landslide opposition win in Japan boosts yen
* Shanghai stocks fall to 3-mth low, hitting risk taking
* Valuations of Asia stocks losing lustre?
By Kevin Plumberg
HONG KONG, Aug 31 (Reuters) - Chinese stocks tumbled 5
percent to a three-month low on Monday, weighing on Asian
stocks and sapping investor willingness to put money at risk,
while the yen rose sharply after Japanese voters swept the
opposition into power.
The election results, while widely anticipated, sparked
some short-term buying of yen on hopes that new policies will
support consumer spending in an economy trapped in deflation
and haunted by a weak growth outlook, though domestic stocks
slipped on exporter weakness. []
Outside of Japan, volatility in Shanghai, a market largely
closed to foreigners, has curbed risk taking and has been
weighing on the Australian dollar, which with its relatively
high yields is a common target for investors searching for
bigger returns.
Shanghai-listed shares dropped 5.4 percent <> on the
day, racking up losses of 21 percent in August and falling
below the 125-day moving average, what is viewed by many
domestic investors as the threshold between bear and bull
markets.
Fears that banks will rein in their lending after a torrid
first six months of the year and an abundance of supply of new
shares have been pushing Chinese shares lower for the last
month, often weighing on global investor sentiment about
holding riskier assets.
U.S. stock futures were down 0.55 percent <SPc1>,
indicating a soft open on Wall Street later in the day, while
Treasury futures were up 0.2 percent <TYc1>.
Shares of Bank of China <601988.SS>, the country's biggest
foreign exchange lender, were down 3.1 percent and the top drag
on the market. Hong Kong's Hang Seng <> dropped 2.2 percent
to a one-month low in sympathy with Shanghai.
Tokyo's Nikkei share average <> slashed early gains
that were led by buying of futures and fell 0.35 percent. Large
exporters Canon Inc <7751.T> and Honda Motor Corp <7267.T> were
among the biggest drags on the Nikkei, losing around 2 percent
each on the stronger yen.
The MSCI index of Asia Pacific stocks traded outside Japan
<.MIAPJ0000PUS> slid 1.4 percent. The selling was widespread,
hitting the consumer discretionary, energy, telecommunications
and materials sectors.
ASIA STOCK'S PREMIUM QUESTIONED
Asian stocks are trading at a price-to-book valuation of
1.1 times, above the 30-year average of 0.7 times and around
the same level at the peak of the last bull market.
Investors since March had been justifying the premium based
on the region's growth prospects and its expected speedy
recovery from the global downturn.
However, the Asian stock rally sputtered in July and August
for two reasons, according to Mark Matthews, Asia Pacific
strategist with Fox-Pitt Kelton ini Hong Kong.
"The first is that the U.S. in particular and the developed
world in general are experiencing economic recoveries that are
more robust than previously expected. The second is that there
is policy shift in China, and even the doves there are happy
that asset prices are no longer rising quickly," he said in a
note.
YEN FOR YEN
In the currency market, the yen got an early boost on the
clear-as-day election result, which eliminated any uncertainty
about Japan's political leadership. The sharp selloff in
Shanghai equities also supported the yen as dealers sought a
safe haven.
The U.S. dollar fell 0.9 percent to 92.60 yen <JPY=>, the
lowest since July 13, and the euro dropped 1.1 percent to
132.24 yen <EURJPY=>.
"The DPJ (Democratic Party of Japan) may favour the
consumer more, which ultimately could be favourable for the
economy, but that's a long-run thing," said Stephen Roberts, an
economist at Nomura in Sydney.
For a graphic on the Japanese election results, click on:
http://graphics.thomsonreuters.com/089/JP_PLTC0809.gif
The Australian dollar was off 0.3 percent to US$0.8398
<AUD=>, though was largely unchanged in August.
The creeping rise of risk aversion in markets pushed down
oil prices, with U.S. crude for October delivery down 0.5
percent to $72.41 a barrel <CLc1>. Brent was down 0.6 percent
to $72.34 a barrel <LCOc1>.
(Editing by Kim Coghill)
