Asian stocks dropped this week on concern China will increase interest rates to cool economic growth. Denway Motors Ltd and Brilliance China Automotive Holdings Ltd, which make cars in China, led the slide.
"We may not be able to bet on continued demand" from China, said Nobuki Goto, who helps manage the equivalent of US$14 billion at Tokio Marine Asset Management Co in Tokyo. "Markets that have been depending on that demand such as Taiwan are going to be more vulnerable."
The Hang Seng China Enterprises Index sank 11 percent this week and was the worst performer among 60 global benchmarks compiled by Bloomberg. All of the index's 37 companies, known as H shares, fell. The Shanghai Composite Index, tracking the larger of China's two stock markets, slid 3 percent. Shenzhen's composite lost 3.4 percent.
The Morgan Stanley Capital International Asia-Pacific Index, which consists of more than 900 stocks, shed 0.8 percent.
Prospects of higher rates in the US, the biggest destination for Asian exports, also helped push down indexes in Hong Kong, Japan and Taiwan for their second declining week in three.
The Standard & Poor's 500 added 0.3 percent, and the Dow Jones Industrial Average gained 0.4 percent. The NASDAQ Composite Index advanced 0.2 percent on expectations second-quarter earnings growth at companies will surpass estimates amid signs of an economic expansion.
China's central bank held a monetary policy meeting on Friday, on which officials declined to comment. Premier Wen Jiabao said June 13 China's government faces a "tough job" to slow growth in the world's seventh-largest economy, which grew at a 9.8 percent annual rate in the first quarter.
Wen's comments, and US reports this week showing rising retail sales, industrial production and producer prices, fueled speculation that higher interest rates are warranted.
The prospect of higher rates "is a concern and the concern is more at the company level," said Choo Yoon Lai, who helps manage about US$2 billion at Comgest (Far East) Ltd. Chinese property, steel and auto manufacturing companies will be most affected, Choo said.
Stock in carmakers fell. Denway plunged 22 percent and Brilliance China tumbled 15 percent in the five days ended Friday. The companies, which both have joint ventures in China, were among the worst performers on the MSCI index.
Jiangxi Copper Co, China's biggest producer of the metal, plunged 16 percent and Aluminum Corp. of China Ltd, the nation's biggest maker of the metal, slumped 15 percent.
Benchmarks around the region also fell after reports this week showed US retail sales rose 1.2 percent in May, and another said industrial production increased 1.1 percent last month, the most in almost six years.
Producer prices climbed 0.8 percent in May, the biggest jump in more than a year, and so-called core prices, which exclude food and energy, rose 0.3 percent, the most since January. The figures, released by the US Labor Department, were higher than the median estimate in a Bloomberg survey.
The reports stoked concerns the US Federal Reserve may have to be more aggressive in raising rates. Higher borrowing costs may hurt spending.
"Higher interest rates will mar the outlook for economic growth," said Hiroshi Mizutani, who helps manage US$3.7 billion in equities at Asahi Life Asset Management Co in Tokyo.