|Market Commentary||Friday, August 03, 2012 16:22 Hrs IST|
Asia Pacific stocks fall on disappointment from Europe, US policy meetings outcome
Asia Pacific stocks closed mostly weaker on Friday, August 03, 2012, as investors booked some of gains made early this week after lack of any new measures announced by overseas central banks.
Risk aversion selloff triggered today on disappointment over new economic stimulus hopes after both the ECB and the Bank of England (BoE) maintained current monetary policies at meetings on Thursday, a day after the US Federal Reserve also held the status quo.
The European Central Bank disappointed investors by not offering concrete plan to resolve the euro region's debt crisis. Expectations were high going into the meeting after ECB President Mario Draghi said last week that the central bank would do whatever it takes to preserve the euro.
ECB President Mario Draghi said that the ECB would gear up to buy Italian and Spanish bonds on the open market and would only act after euro zone governments have activated bailout funds to do the same. Draghi laid out two conditions for ECB action. First, the ECB would only act after euro region governments have activated bailout funds to do the same, and second, the troubled countries would have to make a request for assistance and accept strict conditions for supervision. His comments implied that ECB intervention would not come before September at the earliest, as Germany's constitutional court would only make it's ruling on whether the eurozone's permanent bailout fund is against the German constitution on September 12.
The ECB held its main interest rate at a historical low of 0.75%, while the Bank of England's policy committee also kept the benchmark interest rates at a record low 0.50% and maintained the size of the Asset Purchase Program at GBP375 billion.
On the other side of the Atlantic, the Fed wrapped up a two-day monetary policy meeting on Wednesday, left the federal funds rate unchanged between 0%-0.25% until the end of 2014 and continued the ‘Operation Twist' program until the end of this year, and reiterating its earlier stances that it will stimulate the economy if recovery further deteriorates.
However, key bourses on the regional markets trimmed most of initial losses before finishing trade today, helped by positive opening of the European market on Friday, and as US index futures climbed suggesting US stock market would start a day with healthy note. Investors keenly awaited the release of nonfarm payrolls numbers from the U.S. and the current unemployment rate, which is expected to stay at 8.2%.
The broadest measure of MSCI Asia Pacific index was down 0.9% around late afternoon Friday, August 03, 2012. In the Asia Pacific region, the Australia's All Ordinaries index lost 1%, Japan's Nikkei225 index shed 1.1%, and South Korea's Kospi Composite index fell 1.1%. New Zealand's NZX50 closed 0.5% lower and Taiwan's Taiex lost 0.7%. Hong Kong's Hang Seng index edged down 0.1% and India's Sensex ended tick 0.1% lower. China's Shanghai Composite index rose 1%, Indonesia's Jakarta Composite index added 0.2%, Malaysia's KLSE Composite added 0.1%, and Singapore's Strait Time index rose 0.5%.
Back to the regional markets, the Tokyo stock market wrapped the day with red ink, with the benchmark Nikkei 225 index lost 1.13%, or 98.07 points, to 8,555.11 while the Topix index of all first-section issues gave up 1.23%, or 9.04 points, to 723.94, as lack of any new measures announced by overseas central banks as well as disappointing quarterly earnings from Sharp Corp and Sony Corp. In addition, the yen strengthened close to the lower-78 yen range against the greenback and lower 95-yen range against the euro also fueled selloff.
Shares in electronics giant Sharp Corp plunged 28.1% to 192 yen, a day after the Japanese electronics giant said it would cut 5,000 jobs and reported a huge quarterly loss. The firm said on Thursday that it lost 138.4 billion yen in the April-June quarter, nearly three times more than the same quarter last year. The struggling Japanese electronics maker expects a net loss of 250 billion yen in the current fiscal year, an operating loss of 100 billion yen and revenue of 2.50 trillion yen. It had previously been expecting a 30 billion yen net loss.
Sony Corp shares dropped 7% to 897 yen after the maker of PlayStation game consoles and Bravia televisions reported on Thursday that its fiscal first-quarter net loss widened to 24.6 billion yen and chopped its full-year profit forecast. Sony now expected a 20 billion yen full-year profit, down from an earlier projection of 30 billion yen for the year through March 2013.
Nomura Holdings Inc sank 2.6% to 268 yen after a Nikkei news report saying Japan's financial regulator would discipline the firm's brokerage later Friday in connection with a previously reported insider-trading case.
Mitsubishi Corp shares declined 2.2% to 1,532 yen after commodity trader announced late Thursday that its net profit slipped 15.2% to 98.14 billion yen in the three months to June from a year ago while revenue edged down 0.8% to 4.8 trillion yen in the quarter, mainly due to lower commodity prices and labor action at its Australian coking-coal subsidiary.
In Australia, Equities on the Australian stock market closed in the red on Friday, August 03, 2012, after weak leads from overseas markets. Domestic shares however managed to carve out an advance for the week even as resources stocks copped a late battering. By the provisional closing, the ASX 200 benchmark share index ended the day down 48 points, or 1.1%, to 4221.5 points, while the broader All Ordinaries index shed 47.1 points, or 1.1%, at 4243. For the week, the ASX200 gained 0.3%, notching its third consecutive weekly advance, its longest winning streak since January.
Miners were sold off heavily, with the materials sub-index down 2.5%, while energy stocks shed 1.2%. Industrials also lost 2% and financials 0.7%, while the Telstra-dominated Telco sub-index posted a 0.8% rise for the day. BHP Billiton knocked the most off the ASX200, with the stock losing 2.3%, Rio Tinto dived 4.4% and Fortescue Metals sagged 4.4%. The major banks were all lower for the day, with Commonwealth Bank shed 1.1%.
In China, the Mainland China stockmarket ended modestly higher, with the benchmark Shanghai Composite index advanced 1% to 2,132.80 on Friday, August 03, 2012, bucking regional trend, on rumor of policy easing during weekend after central bank pledge to continue fine-tune policies to maintain stable economic growth.
Most of Chinese blue chips posted healthy gain today with shares in materials, energy, and industrials stocks led rally on speculation that domestic government would further loosen its monetary easing grip during weekend after manufacturing PMI decelerated further last month and gloomy global economic scenario.
China's central bank said it will keep pursuing a prudent monetary policy and the nation's economy will maintain stable growth even amid the risk the global recovery will falter. China will conduct policy fine-tuning at an appropriate time and consumer inflation may rebound after August, the People's Bank of China said in a quarterly monetary- policy report on its website yesterday.
Shares of brokerage houses gained today, after regulators cut trading fees in an effort to restore confidence in the sagging equities markets. The China Securities Regulatory Commission said on Thursday that it would cut transaction fees applied to stocks and futures trades, the third in a series of similar cuts since April.
According to the Shanghai Stock Exchange, fees will drop from 0.0087% to 0.00696% of the transaction value, a drop of 20%, effective on the first day of September. At the same time, the Shenzhen Stock Exchange issued a notice that upon receiving the approval of the CSRC, the standard A-share brokerage fees will be reduced from 0.0087% to 0.00696% of the transaction value, also effective on the first day of September. The statement said combined savings from the three rounds of cuts would total 15.5 billion yuan in trading fees this year.
The CSRC has also encouraged firms whose share prices have fallen below their net asset value per share to buy back their shares. Such share buybacks usually result in increased valuations of outstanding shares by reducing net supply. Separately, the official Xinhua News Agency said that China is also considering reducing stamp duty on share trading.
Among securities brokerage firms, Sinolink Securities Co gained 3.2% to 11.99 yuan. China Merchants Securities Co jumped 1.4% to 10.65 yuan. Founder Securities Co added 2.3% to 4.54 yuan. Haitong Securities Co jumped 1% to 9.82 yuan. Citic Securities Co added 0.4% to 12.01 yuan.
Oil & coal producers were also higher, inline with rebound in crude oil prices in Asia deal today. PetroChina Co added 1.2% to 9.02 yuan and China Petroleum & Chemical Corp 2.2% to 6.08 yuan. China Coal increased 1.9% to 7.66 yuan and China Shenhua Energy Co 1.8% to 22.45 yuan.
In India, the Indian stock markets ended the session in the red on the back of poor global cues. The barometer index, BSE Sensex, was provisionally down 17.98 points or 0.1%, up close to 180 points from the day's low. All sectoral indices barring healthcare, oil and gas, IT and TECk sectors ended in the red. Among them, metal (down 1.64%) and auto (down 0.83%) succumbed to heavy selling pressure.
Index heavyweights ITC edged lower. But, another index heavyweight Reliance Industries (RIL) reversed intraday losses. IT stocks rose on a weak rupee. Marico dropped after reporting strong Q1 June 2012 results after the company said the healthy profit margins, which the company achieved in Q1 June 2012, are unlikely to sustain during the remaining quarters of the current financial year. Pharma stocks extended their recent uptrend, with Sun Pharmaceutical Industries hitting a record high. Sun TV Network fell on poor Q1 results.