China stocks lead Asia slump after Fed minutes

HONG KONG (MarketWatch) � Asian stocks tumbled Thursday after minutes from the latest Federal Reserve policy meeting stoked concerns that central-bank policy-tightening moves will reduce global liquidity, which has supported stocks in recent months.

Hong Kong�s Hang Seng Index HK:HSI �dropped 1.7%, while the Shanghai Composite Index CN:000001 �plunged 3%, with worries about liquidity tightening by the central bank adding to the selling pressure.

In Japan, the Nikkei Stock Average JP:100000018 �lost 1.4%, South Korea�s Kospi KR:SEU �declined 0.5%, and Australia�s S&P/ASX 200 index AU:XJO �skidded 2.3%.

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Minutes of the Federal Reserve�s January meeting out Wednesday offered differing views from the central bank�s rate-setting board on asset purchases, prompting a sharp fall in U.S. stocks Wednesday. Read: Fed, uneasy over �QE,� plans bond-buy debate.

The Fed, along with other global central banks, has provided massive amounts of liquidity to markets since the onset of the global financial crisis � liquidity which has worked its way through to various asset classes.

Perpetual Investments head of investment research Matthew Sherwood said that while stocks had gained aggressively over the past eight months, in part due to central-bank largesse, �all of a sudden� that pillar of market gains may be at risk.

Cr�dit Agricole strategist Frances Cheung said Asian investors were concerned that �a smaller-than-anticipated size of the Fed balance sheet ... would imply less funds available to purchase [assets] than what is currently priced in.�

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�There's been a flight to quality into U.S. dollar assets,� said Sherwood at Perpetual Investments.

Commodity stocks sold down

While gold prices dropped further in Asia Thursday, commodity-related stocks fell sharply across Asia.

Rio Tinto Ltd. AU:RIO �RIO �fell 3%, BHP Billiton Ltd. AU:BHP �BHP �tumbled 3.8% and gold producer Newcrest Mining Ltd. AU:NCM �NCMGF �fell 3.7% in Sydney.

Among Chinese commodity producers, Aluminum Corp. of China Ltd. HK:2600 ACH , also known as Chalco, fell 2.5% in Hong Kong; in Shanghai, Chalco CN:601600 �dropped 3.7%, Jiangxi Copper Co. CN:600362 �JIXAY �sank 5.9% and gold miner Zijin Mining Group Co. CN:601899 �ZIJMY gave up 2.4%.

In Seoul, steel major Posco KR:005490 �PKX �gave up 1.8% and Hyundai Steel Co. KR:004020 �HYNSY shed 1.7%.

Heavy-machinery suppliers came under pressure in Japan after U.S. firm Caterpillar Inc. CAT �posted a 4% drop in mining- and construction-equipment sales over three months. Read: Caterpillar sales fall in last three months