HONG KONG/WASHINGTON- Asian stocks reversed earlier gains on Tuesday, weighed by Chinese markets as investors took profit on a recent rally in some mainland firms, although ebbing inflation fears helped shore up broader sentiment in the region.
MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.57 percent, hurt by a 1.5 percent fall in Chinese blue chips.
Gary Ng, economist at Natixis, said Chinese shares had run ahead of other Asian markets recently, which meant they were due for some kind of correction.
Overnight announcements of new sanctions also did not help Chinese stocks, even though analysts said markets had become fairly accustomed to such developments.
The United States and others including the European Union sanctioned Chinese officials on Monday for human rights abuses in Xinjiang, and Beijing hit back with punitive measures against European lawmakers, diplomats, institutes and families.
Jin Jing, an analyst with China Fortune Securities, said sanctions hurt risk appetite, in particular for foreign investors, who sold shares via the Stock Connect.
Persistent worries of policy tightening at home also continued to weigh on high-flying sectors and stocks with lofty valuations as investors turned cautious.
Beyond China, Asian shares were mixed after Wall Street’s gains on Monday as investors cheered a break in the recent run-up of bond yields.
The Dow Jones Industrial Average rose 0.32 percent, the S&P 500 gained 0.70 percent and the Nasdaq Composite added 1.23 percent.