Asian markets down on fears of China tightening

Most Asian markets fell Monday on concerns China will act to rein in credit and slow growth after a survey showed manufacturing activity expanded at a record pace in January. In Tokyo, stocks ended mixed as the auto sector remained under pressure following safety recalls by Toyota and Honda. The benchmark Nikkei-225 index rose 6.98 points, or 0.

07 percent, to 10,205.02. The broader Topix index of all first-section shares shed 2.51 points, or 0.

28 percent, to 898.61. Toyota lost 40 yen, or 1.1 percent, to 3,450 yen while Honda dropped 76 yen, or 2.

5 percent, to 2,999 yen. Toyota announced late Friday it was recalling up to 1.8 million vehicles in Europe, expanding a programme that has already affected the United States and China, while Honda pulled 646,000 cars worldwide. Shanghai and Australia were hit by fears Beijing will take measures to slow growth.

Chinese shares closed down 1.60 percent as sentiment remained weak over concerns of further loan restrictions later in the year, dealers said. The Shanghai Composite Index, which covers both A and B shares, was down 47.93 points at 2,941.

36 on turnover of 103.8 billion yuan (15.2 billion dollars). "Investors remained worried that the authority may continue to tighten credit on news that new yuan loans in January continued to expand," said Cao Xuefeng, an analyst from Hua Xi Securities.

Banks led the declines as concerns over further lending restrictions increased after state media reported Monday that new loans in January totalled a massive 1.6 trillion yuan. Shanghai Pudong Development Bank was down 2.0 percent at 19.

22 yuan, and Bank of Communications fell 1.4 percent to 8.06. Analysts also said that irrational investors had shrugged off the good news that manufacturing activity expanded at a record pace in January, the highest since data were first collected in April 2004, according to a survey by HSBC.

While the figures implied stronger GDP growth in the first quarter "rising input and output prices also point to greater inflationary pressure, which will likely prompt more tightening measures in the coming months," Qu Hongbin, chief economist for China at HSBC, said in a statement. A purchasing managers' index published by the China Federation of Logistics and Purchasing showed manufacturing activity expanded for the 11th consecutive month in January but slightly slower than in December. Airline stocks bucked the downward trend after crude oil prices fell overnight. Air China rose 2.

5 percent to 10.44 yuan and China Southern Airlines gained 1.8 percent to 6.20.

Hong Kong shares closed up 0.61 percent, reversing early losses on bargain hunting. The benchmark Hang Seng Index added 121.76 points to end at 20,243.

75. Australian share prices closed down one percent after the release of the Chinese manufacturing figures. The benchmark S&P/ASX200 index fell 45.5 points, or 1.

00 percent, to 4,524.1 points, while the broader All Ordinaries index shed 52.1 points, or 1.13 percent, to 4,544.

8 points. "The market significantly outperformed leads early on, however, as soon as Asian markets opened, the selling resumed and accelerated after the Chinese numbers," IG Markets research analyst Ben Potter said. "Now that the market seems to be in a bad mood it is looking at all this data and saying, 'Now China is growing too fast they are going to have to continue to slow down lending and slow down growth'," Potter told AFP. "In essence, what they are concerned about is the fact that the Chinese are going to have to slow down growth more than they have done already.

" Uncertainty over the strength of global demand hit oil prices. New York's main futures contract, light sweet crude for delivery in March, was down 13 cents to 72.76 dollars a barrel. London's Brent North Sea crude for March delivery dropped 16 cents to 71.

30 dollars per barrel. The dollar was trading at 90.19 yen in Tokyo afternoon trade, unchanged from its level in New York late Friday. The euro rose to 1.

3877 dollars from 1.3862 and to 125.19 yen from 125.15.