|Market Commentary||Thursday, August 02, 2012 16:48 Hrs IST|
Asia Pacific stocks ease after Fed inaction, await ECB
Asia Pacific stocks moved lower on Thursday, August 02, 2012, as investors took out recent gains after the US Federal Reserve dashed expectation among some investors by taking no new monetary policy measures.
US Federal Reserve preferred to stay put on the monetary policy easing plans, a new round of quantitative easing, or QE3, in a statement yesterday, despite offering a sobering assessment of the U.S economy.
The Fed wrapped up a two-day monetary policy meeting on Wednesday and made no changes to interest rates or policy in general, reiterating earlier stances that it will stimulate the economy if recovery further deteriorates. The Fed left its benchmark interest rate, the fed funds target, unchanged at 0.25% and added that economic conditions meriting loose policies will likely stick around through the end of 2014.
However, the US central bank said it would stay on the sidelines with no plans for now to stimulate the economy via tools such as quantitative easing, which are bond purchases from banks that flood the economy with liquidity, weakening the dollar in the process to spur recovery in a way that boosts stock prices. The Committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability, the Fed added
Risk aversion selloff also triggered as pessimism over a global economic slowdown intensified after weak manufacturing number from the China, Australia, the euro zone, and the US. China's official manufacturing Purchasing Managers Index fell slightly to 50.1 in July compared with 50.2 in June. The Australian Industry Group-PricewaterhouseCoopers Australian Performance of Manufacturing Index fell 6.9 points to 40.3 on month, The US Institute for Supply Management's factory index was 49.8 last month, little changed from a three-year low of 49.7 reached in June, but remain under contraction terrain. Euro-area manufacturing contracted for straight 12th month in July. A gauge of manufacturing in the 17-nation region fell to a 37-month low of 44.
Today, all eyes have turned toward Europe, where the European Central Bank holds its policy meeting tonight, as Mario Draghi's positive statement last week has ignited hopes of substantial monetary stimulus in Europe. Market participants are expecting something substantial to emanate out from the ECB speech to quell the eurozone sovereign debt crisis and spur stuttering economic growth.
Back to country wise coverage, Tokyo stocks closed slightly higher today, with the Nikkei Stock Average climbing 11.33 points, or 0.13%, to 8,653.18. Shares in utilities, steelmakers, nonferrous metal producers, and banks and financials led rally. Positive finishing of domestic market were mostly due to some sales and earnings results as well as lingering speculation that the European Central Bank will do more to contain the debt crisis.
Aggressive buying did not last, however, as investors were cautious ahead of the board meeting later in the evening of the European Central Bank. The trading value on the first section of the Tokyo Stock Exchange totaled about 1 trillion yen on a preliminary basis.
Toyota Motor Corp advanced 1.3% to 3,045 yen in response to a report that the carmaker will increase its 2012 global output to record levels. Toyota also said on Wednesday that it will recall nearly 780,000 vehicles in the United States to fix a defect that could allow rust to form in the suspension to the point where parts break off.
Mitsui Fudosan Co added 1.3% to 1,539 yen after the real-estate firm posted a jump in first-quarter net profit.
Kyocera climbed 5.1% to 6,420 yen after the company's first-quarter earnings results met market expectations.
Aozora Bank jumped 9% to 194 yen after the company announced that it is close to an agreement with major shareholders and will hold an extraordinary shareholders meeting later August.
Sharp ended up 0.8% at 267 yen, on the back of expectations that the firm is making a progress on cost-cutting measures by cutting 5,000 jobs in the world. The struggling Japanese electronics maker expects a net loss of 250 billion yen ($3.19 billion) in the current fiscal year, an operating loss of Y100 billion and revenue of Y2.50 trillion. It had previously been expecting an Y30 billion net loss.
In Australia, Sydney shares have closed modestly higher after positive retail trade data kept investors cautiously optimistic as they wait on ECB to announce stronger action to fix the eurozone crisis. The benchmark S&P/ASX200 index jumped 6.7 points, or 0.2%, to 4269.5, while the broader All Ordinaries added 7.4 points, or 0.2%, to 4290.1.
In China, Mainland China stocks wrapped the sluggish trading day with red ink, with the benchmark Shanghai Composite index declined 0.57% down from prior day to 2,111.18, as risk aversion selloff took toll across the board on pessimism over a slowdown in the domestic economy intensified after disappointing manufacturing data. In today's trade, most of market heavyweights turned lower, with shares in energy, materials, and financials companies led retreat.
Shares of realty developers suffered heavy losses today, on concerns that the central government will step up efforts to tame home prices. It was reported today that inspection teams sent by the State Council, of the Cabinet, has started thorough investigation to make sure local governments are strictly following property controlling measures taken by the central government. Housing authority of Zhejiang Province said yesterday that it would punish the Yiwu City watchdog if the city has actually canceled home purchase limits.
Among developers, China Vanke tumbled 6.8% to 8.70 yuan, Gemdale Corp 6.4% to 5.43 yuan, and Poly Real Estate Group Co 9.2% to 10.30 yuan.
In Hong Kong, The Hong Kong stock market fell down, with the benchmark Hang Seng index ended at 19,690.20, down by 0.66% from prior day, on the back of heavy losses in banks and financials, realty, and resources stocks, after the US central bank dashed expectations among some investors by taking no new measures.
Among blue chips, China Resource Land declined 4.6% to HK$14.82; while Sino Land added 1.7% to HK$13.59, making both stocks the top blue-chip losers and gainer. Meanwhile, most of market heavyweights were softer, with China Mobile dipped 1.5% to HK$88.35. HSBC Holdings was down 0.1% to HK$65.65. Mainland developers tanked today on news that Yiwu city in Zhejiang Province denied the scrap of home-purchase restrictions. Meanwhile, there were rumors that the government may abolish the presale mechanism. Agile retreated 3.5% to HK$8.84. R&F slipped 4.3% to HK$9.54. KWG plunged 5.2% to HK$4.22. Evergrande was down 5% to HK$3.45.
In India, Indian benchmark indices snapped four days winning streak as investors nervously awaited the latest policy decision from the European Central Bank. The barometer index, BSE Sensex, was provisionally down 35.69 points or 0.21%, up about 65 points from the day's low and off close to 25 points from the day's high.
Indian Index heavyweight and cigarette maker ITC hit record high. Index heavyweight Reliance Industries (RIL) trimmed intraday losses in volatile trade. Ashok Leyland surged after strong sales in the month just gone by. Shares of companies whose fortunes are linked to orders from Indian Railways and construction shares surged after Prime Minister Dr. Manmohan Singh today, 2 August 2012, approved relaxation in the land transfer policy of the government for government owned land so that infrastructure projects are not held up because of procedural delays. Airline stocks were mostly lower as state-owned oil companies on Wednesday raised jet fuel or ATF rates by a steep 4.5% on firming international crude oil prices. Power generation major NTPC surged after block deals on BSE. Capital goods stocks extended recent gains. Interest rate sensitive banking stocks were mostly lower as the Reserve Bank of India (RBI) kept repo rate unchanged at its first quarter review of the Monetary Policy 2012-13 early this week. Lube oil major Castrol India hit record high.