Seoul: Asian stocks fell for a third consecutive week after North Korea fired artillery shells into South Korea, swelling concern that tensions will escalate.
Korean Air Lines Co, the nation's biggest line by market value, declined 5.4 per cent in Seoul. Hyundai Motor Co, South Korea's largest carmaker by market capitalisation, dropped 6.9 per cent.
Sun Hung Kai Properties Ltd, the world's biggest developer by market value, slid 6.1 per cent in Hong Kong after the government unveiled new measures to prevent a bubble in real-estate prices. Honda Motor Co, Japan's second-largest carmaker by sales, sank 1.9 per cent.
The MSCI Asia Pacific Index declined 2.1 per cent to 128.92 last week. The gauge slid on Tuesday after government and media reports that North Korea fired dozens of artillery rounds into South Korean territory, its first such attack in half a century.
"Markets are factoring in the likelihood of some sort of additional action by the North Koreans," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne.
"What was initially dismissed as a one-off skirmish is now making people a little bit nervous."
South Korea's Kospi index slid 2 per cent last week, its biggest weekly decline since August. Hong Kong's Hang Seng Index sank 3.1 per cent, the biggest drop among major equity indexes in the Asia-Pacific region.
The Shanghai Composite Index retreated 0.6 per cent in China, where the central bank increased the reserve ratio for the second time in two weeks to cool inflation. Australia's S&P/ASX 200 Index slipped 0.7 per cent.
In Japan, where markets were closed on Tuesday for a holiday, the Nikkei 225 Stock Average climbed 0.2 per cent while the broader Topix index lost 0.3 per cent.
Uncertainty
Tensions with North Korea have risen since the sinking of the South Korean warship Cheonan in March, which killed 46 sailors.
The shelling of Yeonpyeong island, which killed four people and wounded 20, was the first of its kind since the 1950-1953 Korean War and spurred President Barack Obama to send a US aircraft carrier to the Yellow Sea as a show of support and strength.
"A bubbling over of tensions in Korea is another layer of uncertainty for markets that they don't need to contend with," said Pengana's Schroeders.
"There's enough going on in terms of European debt problems and Chinese inflation without having to deal with erupting geopolitical tensions. It's probably just another trigger point for people to sell."
Hong Kong property
The MSCI Asia Pacific Index is little changed this month.
It has risen about 7.4 per cent this year on speculation earnings growth will outweigh China's measures to tackle the fastest inflation in two years, and Europe's fiscal deficit crisis.
Stocks on the gauge are valued at 14 times estimated earnings on average, compared with 23 times at the start of the year.
A group of finance-related shares, including real-estate companies, dropped the most last week among the 10 industry groups in the MSCI Asia Pacific Index, and Hong Kong developers led declines among the Hang Seng Index's four industry groups.
Financial Secretary John Tsang a week ago raised the stamp duty and increased deposits, the toughest measures yet to rein in gains in home values, which have soared 50 per cent since January 2009.
Hong Kong Monetary Authority Chief Executive Norman Chan said down payments for some homes will be increased, the second boost in requirements this year.
"Government measures to cool property prices are showing some effect, and developers are headed for a long decline," said Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong.
