* Asia shares fall 0.4 pct, China data spurs rate hike
fears
* Asian shares off 7-week highs but downside seen limited
* Yen recovers; Australian dollar dip on jobs data
* Gold bounces from 2-week low; oil eases from 8-wk high
By Kevin Yao
SINGAPORE, March 11 (Reuters) - Asian stocks fell on
Thursday as investors worried strong loan growth and quickening
inflation in China would spur Beijing to tighten monetary
policy sooner than expected, while the yen rebounded against
major currencies.
European equities were set track Asia lower, with financial
spreadbetters expecting Britain's FTSE 100 <>, Germany's
DAX <> and France's CAC 40 <> to fall as much as 0.5
percent.
The MSCI index of Asian shares outside Japan
<.MIAPJ0000PUS> shed 0.5 percent, retreating from a seven-week
high touched before the release of the Chinese data, which
showed stronger-than-expected growth in factory output and
consumer inflation accelerating to a 16-month high.
[]
Some economists said the central bank would probably not
wait long before increasing banks' required reserves for a
third time this year and perhaps even raising interest rates.
Broader losses were limited, however, by the view that
gradual policy tightening in China would do little to slow its
robust growth and that Asia's economic recovery remains on
track.
Foreign buying of Asian stocks, particularly South Korea,
Japan and India, continued unabated with data showing emerging
market equity funds reported a third straight week of inflows.
Shanghai stocks <> shed as much as 0.8 percent as
investors feared that strong loan growth in February could
prompt the authorities to soak up more cash from the financial
system. But the market later recouped its losses to stand
slightly higher, as did the Hang Seng index <> in Hong
Kong.
China's central bank drained a net 82 billion yuan from
money markets this week by issuing large amounts of bills, as
part of its efforts to head off economic overheating and asset
bubbles.
"February new loans remained higher than the government
intends it to be, so we expect another rise in bank reserve
requirements to come very soon, almost certainly this month,"
said Zheng Weigang, head of investment at Shanghai Securities.
"An interest rate hike will wait at least until the second
quarter."
Fears that China could tighten monetary policy have fuelled
risk aversion in recent weeks, alongside jitters over debt
problems in some European countries.
Japan's Nikkei average <> bucked the regional
weakness, rising 0.9 percent as exporters such as Sony <6758.T>
climbed on general weakness in the yen.
"Trading by foreign investors and funds backed by domestic
individual investors is dominating the market now as Japanese
institutional investors can't really move actively because this
month is the end of the business year in Japan," said Tsuyoshi
Segawa, an equity strategist at Mizuho Securities.
"The focus will be on important events in Japan, the United
States and Europe all happening next week, namely the Federal
Reserve and the Bank of Japan policy review as well as Greece's
future plans."
EU finance ministers meet on March 16 to discuss Greece's
debt problems and their exit strategies from fiscal stimulus
worth hundreds of billions of euros to battle the global
financial crisis. []
YEN RECOVERS
The yen climbed after the Chinese data prompted investors
to cut their long positions in higher-yielding currencies.
The dollar <JPY=> fell a fifth of a percent to 90.35 yen,
having climbed as far as 90.83 on Wednesday, a two-week high.
But gains in the yen were expected to be limited after
sources told Reuters that the Bank of Japan may ease monetary
policy as early as next week as it remains under government
pressure to help pull the country out of grinding deflation.
[]
Data on Thursday showed the economy grew less than
initially expected in the fourth quarter of 2009 and a broad
gauge of price trends hit a record negative reading.
[]
The euro dropped to 123.28 yen <EURJPY=R>, while sterling
eased to $1.4955 <GBP=D4> after an unexpected drop in British
industrial production data for January released the previous
day.
The Australian dollar <AUD=> took a knock after the Chinese
data but later bounced on bets of further interest rate rises
at home.
Gold regained some strength after falling to its weakest in
nearly two weeks the previous day, while oil prices <CLc1>
retreated 50 cents from an eight-week high hit on Wednesday.
(Additional reporting by Lu Jianxin in SHANGHAI and Aiko
Hayashi in TOKYO; Editing by Kim Coghill)
