Asian Markets Head Ahead

Financial stocks act as accelerator while exports tried to put brake on further advance

Stock markets in Asian region continued their winning streak on Thursday, 19 March 2009, as most of the Asian markets continued to gain taking a positive clue from the overnight gain on Wall Street and weakening of US dollar against most of the regional currencies.

Stocks market on Wall Street turned a down day around to lock in 1% to 2% gains after the government said it would expand its quantitative easing efforts. Bank of America and Citigroup surged more than 20%, leading the Dow Jones Industrial Average, which rose 92.39 points, or 1.3%, to 7448.09, while the S&P 500 added 16.26 points, or 2.1%, to 794.38. The Nasdaq was better by 29.11 points, or 2%, to 1419.22, celebrating the prospective buyout of Sun Microsystems.

The Fed Open Market Committee (FOMC) wrapped up its meeting on Tuesday afternoon, saying it would keep its key interest rate at record low rates. Of note, the FOMC said it would purchase up to $750 billion of agency mortgage-backed securities, bringing its total purchases up to $1.25 trillion in 2009. The Fed will also purchase up to $300 billion of longer-term Treasury securities over the next six months to help conditions in private credit markets, and said it could expand the Term Asset Backed Securities Loan Facility (TALF) to include other financial assets.

In the commodity market, crude oil rebounded on optimism the U.S. Federal Reserve’s plan to buy back debt will end the global recession, reviving demand for fuels. The Fed is seeking to purchase about $1 trillion of U.S. Treasuries, mortgage-backed bonds and other debt.

Crude oil for April delivery rose as much as $1.69, or 3.5%, to $49.83 a barrel on the New York Mercantile Exchange. It was at $49.78 a barrel at 10:23 a.m. London time. Yesterday, futures fell $1.02, or 2.1%, to $48.14 a barrel. Prices are up 10 percent this year. The April contract expires tomorrow. The more-active May contract was at $49.85 a barrel, up 95 cents, at 1:28 p.m. Singapore time.

Brent crude oil for May settlement rose as much as $1.38, or 2.9%, to $49.04 a barrel on London’s ICE Futures Europe exchange. It was at $48.70 a barrel at 10:23 a.m. London time.

Gold continues to soar in Asia as the post Fed euphoria refuses to let go. Dollar is falling apart across the board after the US FED statement. COMEX Gold rebounded sharply immediately after the FOMC announcement, spiking well pass $900 and reached a high of $941.60 per ounce. The metal was also spurred by the helpful US inflation data yesterday.

In the currency market, the Japanese yen strengthened to 95.5460 against the US dollar, up from Wednesday quote of 98.54 yen.

The Hong Kong dollar was trading at HK$ 7.7516 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trades, the Australian dollar finished the local session at a two-month high on Thursday as investors sold the US currency following the American central bank's decision to buy fixed-income securities. The Australian dollar finished trading at $US0.6746/48, up two per cent from Wednesday's close of $US0.6613/17 - the highest local close since 19 January 2009 when the currency ended the domestic session at $US0.6812/14.

In Wellington trades, the New Zealand dollar jumped over a cent against the greenback after the United States Federal Reserve unveiled more measures to revive the US economy.

The kiwi surged to a two-month high around US54.60c after the announcement this morning. The kiwi lost some of its gains during domestic trading hours to close trading at US54.16 cents, compared with US53.01 cents on Wednesday.

The South Korean currency rose to a one-month high against the U.S. dollar on Thursday as a plan by the U.S. Federal Reserve to buy government bonds revived appetite for riskier assets. The local currency closed at 1,396 won to the greenback, up 25.5 won, or 1.83% from Wednesday and the highest level since 11 February 2009.

The Taiwan dollar strengthened as it closed the trading at NT$ 33.924 up by NT$ 0.023 from Wednesday’s close of NT$34.156

Coming back in equities, in Japan, the benchmark Nikkei 225 snapped its four days winning streak, as Fed’s move caused the Japanese yen to strengthen against the US dollar, weighing the exporters down. Despite of opening higher, the Nikkei 225 Stock Average index tumbled 26.21 points, or 0.3%, to 7,945.96, while the broader Topix edged up 0.1 points, or 0.04%, to 765. The Nikkei has climbed 5% this week, while the Topix jumped 5.7%, its best performance in 2009. Central Bank’s interest rate decision of keeping the rate constant fell to cherish the stock markets as market ended the holiday-shortened week on a negative note. Japan’s markets will be closed tomorrow for a holiday.

On the economic front, Japan’s central bank left its super-low interest rates unchanged for a third straight month and announced it would pump more cash into the financial system to tackle a severe recession. The Bank of Japan said it will increase bond purchases from banks and hopes for the flow of money coming into the global financial system after the US Federal Reserve decision to add another $US1.15 trillion ($A1.74 trillion) to its efforts to ignite an economic recovery.

In Mainland China, the picture was exactly opposite as the markets continued to end finish higher for the fourth consecutive session, led by the coal producers and property developers. Tracking the positive Wall Street cues the Chinese market opened the day with positive sentiments.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, surged 42.03 points, or 1.9%, to 2,265.75. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange added 1.85%, or 156.51 points, to 8,622.47.

On the economic front, China's holdings of US Treasury bonds hit US$739.6 billion by the end of January, US$12.2 billion more than that of a month ago. According to the latest International Capital Report by the US Treasury Department the increase was the slightest since June 2008, and it is expected that China, the largest creditor of the US government succeeded by Japan, will continue to slow its purchase of U.S. bonds in the future due to the plunging trade surplus and increasing concerns over investment security.

In Hong Kong, the stock markets followed their Chinese counterparts by ending the day slightly higher. The benchmark Hang Seng Index opened 88 points higher at 13,205. After touching the intraday low of 12,947.90 points, Hang Seng Index climbed 13.75 points or 0.1% to close at 13.130.92. The Hang Seng China Enterprise Index, which tracks the overall performance of 43 Chinese mainland state-owned enterprises on the Hong Kong Stock Exchange, edged up 98.91 points or 1.3% to 7,731.41 points.

In Australia, the stock markets closed the day on a successful note as strong gains in banks offset a drop in Telstra to a record low on a fresh battle with the competition watchdog. Towards its closing, the benchmark S&P/ASX200 index was up 1%, or 33.9 points, at 3480.2 after rising as much as 1.6% this morning to briefly pass the 3500 barrier. The broad-market All Ordinaries index was up 0.9%, or 30.60 points, at 3416.8.

Though market showed some resilience, there was lot of upheaval on the economic front as housing starts slumped to their lowest level in almost eight years in the December quarter as potential home owners were sidelined by worries about the economy.

According to the data released by the Australian Bureau of Statistics (ABS), the number of dwelling commencements fell by 9.9% to 32,637 units, seasonally adjusted, in the December quarter. Quarterly housing starts had not been this low since June 2001. In the year to December, total housing starts dropped by 19.5%.

On the other hand, the Reserve Bank of Australia expects the local economy to remain weak in 2009, but is confidant policy makers have the necessary tools to support the nation during the global financial crisis. RBA assistant governor of economics Malcolm Edey says Australia is being affected by the "very severe" crisis and sharp downturn in global demand and activity.

In New Zealand, the stock market followed the regional trend by ending its session on a higher for the fifth consecutive session. New Zealand's benchmark NZX-50 index closed up 26.88 points or 1.03% to 2633.21, following a 41.6-point rise on Wednesday.

Bucking the regional trend the stock market in South Korea closed the day slightly higher as institutional selling overshadowed overnight gains in U.S. markets. The benchmark Korea Composite Stock Price Index fell 8.14 points, or 0.7 percent, to 1,161.81. The South Korean won closed at 1,396 won to the dollar, up 25.5 won from Wednesday's close, on expectations that South Korea may post a large trade surplus this month.

On the economic front, South Korea's jobless rate jumped to a four-year high in February as companies scaled back recruitment in the face of deepening recession woes. According to the report by the National Statistical Office, the unemployment rate was 3.9% in February 2009, up from the previous month's 3.6%.

In Taiwan, stock markets snapped its four days of winning streak by ending the day in negative terrain, as investors locked in profits from recent advances on the market. A sharp rise in the Taiwan dollar also pressured exporters that showed some correction during the day.

The main Taiex share index showed some slight correction by closing marginally lower by 11.61 points or 0.23% at 5,035.93, receding from yesterday’s 5 month high when market closed the day at 5047.54; the highest closing since 16 October 2008 when market closed the day at 5075.97. However during intra day movement the market successfully breached this five month as it moved in the wide range of 5125.40 –5035.82.

In Philippines, stock market continued to take an uphill for the second consecutive day, assisted by the gains in Wall Street overnight. The benchmark index PSEi escalated 0.56% or 9.98 points to 1,780.26, while the All Shares index climbed 0.46% or 5.41 points to 1,176.68.

In India, it was a day of immense volatility with alternate bouts of buying and selling. The key benchmark indices ended slightly higher after recovering sharply in mid-afternoon trade. Expectations of a further cut in policy rates by the Reserve Bank of India and firm European markets triggered a late recovery. The BSE 30-share Sensex was up 25.07 points, or 0.28%, to 9,001.75. The S&P CNX Nifty was up 12.45 points or 0.45% to 2,807.15.

Elsewhere, Malaysia's Kula Lumpur Composite index was up 0.50% or 4.22 points to 852.18, while Indonesia’s Jakarta composite increased by 18.77 points or 1.42% to 1,341.60. In Thailand, the Thai Stock exchange added 1.52 points or 0.36% to 427.72.

In other regional markets, stocks in Europe advanced on Thursday, in the first opportunity to react to the news the Federal Reserve was following in the Bank of England's footsteps with the direct purchase of $300 billion in long-term Treasury bonds.

By region, the FTSE 100 was down 0.1% to 3,801.24; with HSBC Holdings dragging the index lower with a 3% fall a day ahead of the trading of its discounted share offer. The German DAX 30 rose 1.2% to 4,044.46 and the French CAC 40 added 1.4% to 2,797.90.