Asian Markets Stage Retrieval

Shanghai led regional rally on hopes of another stimulus package

Stock market
in Asian region staged a recovery on Wednesday, 4 March 2009, on hopes of another stimulus package for China's economy, after opening in negative territory on the back of a weaker close in the U.S market last night.

On Wall Street, it was another session of losses that left the S&P 500 at a level not seen for more than 12 years. Bargain-hunters emerged early following the sell off a day ago, but their interest faded into mid session. However, stocks rallied again in the afternoon before slipping back in the final hour. The S&P fell 4.49 points, or 0.6%, to 696.33, its first finish below 700 since October 1996. The Nasdaq settled down 1.84 points, or 0.1%, at 1321.01. The Dow Jones Industrial Average declined 37.27 points, or 0.6%, to 6726.02.

On the economic front, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner spoke before elected officials. Geithner defended the proposed $3.6 trillion budget that seeks to reduce the federal deficit to $533 billion by 2013, and warned of the consequences of not reducing the deficit.

Federal Reserve Chairman Ben Bernanke was generally supportive of Obama's efforts to stimulate the economy. Bernanke told the Senate Budget Committee that Obama's recently enacted $787 billion stimulus package of increased federal spending and tax cuts should help revive consumer spending, boost factory production and mitigate the overall loss of employment and income that would otherwise occur.

In the commodity market, crude oil fell in New York after Australia’s economy unexpectedly shrank in the fourth quarter, adding to signs the deepening recession will limit fuel demand.

Crude oil for April delivery gained as $1.80, or 4.32%, to $43.45 a barrel in electronic trading on the New York Mercantile Exchange at 11:55 p.m. London time. Yesterday, April futures rose $1.50, or 3.7%, to settle at $41.65 a barrel in New York.

Brent crude oil for April settlement added 83 cents, or 1.9%, to $44.53 a barrel on London’s ICE Futures Europe exchange at 11:13 p.m. London time.

Gold tumbled the most in seven weeks, extending the longest slump since October, as a rebound in equities eroded the investment appeal of the metal. Gold futures for April delivery fell $26.40, or 2.8%, to $913.60 an ounce on the Comex division of the New York Mercantile Exchange, the biggest drop since 12 January 2009. Earlier, the metal touched $905.70, the lowest for a most-active contract since 10 February 2009. Gold fell $5.40, or 0.59%, to $908.20 an ounce at 10:55 a.m. in London time.

In the currency market, the Japanese yen was quoted at 98.49 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7596 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, Australia’s dollar fell against the greenback by the most in three weeks after the economy shrank for the first time in eight years, increasing pressure on the central bank to add to a record round of interest-rate cuts.

The Australian dollar reacted negatively to Australian economy’s contraction. The local currency was trading at $US0.6385 just before the data were released at 1130 AEDT, but fell to$US0.6292 shortly afterwards. The Australian dollar closed the day at US$ 0.6326, i.e. stronger than US$ 0.6390 registered yesterday.

In Wellington trades, the New Zealand dollar recovered from a slide to a seven-month low against its Australian counterpart after the Reserve Bank of Australia left its key cash rate at 3.25 percent on Tuesday. The NZ dollar ended the day at A78.10c from A77.60c yesterday.

The South Korean currency rose against the U.S. dollar for the first time in four sessions as foreign exchange authorities apparently stepped in to stem the won's sharp decline. The local currency ended at 1,551 won against the U.S. dollar, up 1.4 won from Tuesday's close of 1,552.4 won, on suspected government intervention.

In a reversal of the consecutive devaluation in the previous three trading sessions, the exchange rate of the New Taiwan dollar gained NT$0.079 closing at NT$35.095 yesterday. The appreciation was in step with the movement of other major Asian currencies, thanks to the joint intervention of the central banks of Taiwan, Korea, Singapore, and Japan.

The Taiwan dollar was trading at NT$ 35.0510 lower by NT$ 0.0044 from yesterday’s close of NT$35.095, as the joint intervention of the central banks of Taiwan, Korea, Singapore, and Japan helped to step up appreciation.

Philippines peso edged higher against the US dollar. The peso advanced to a 2-day high of 48.65 against the greenback in early trades today, compared to yesterday's close of 48.74. However, currently the dollar peso pair is trading at 48.7500.

Coming back in Asian equities, financial stocks continued to be the cause of concern and dragged the indices in early trade. However, commodity related stocks and manufacturing stocks led the recovery after an economic report from the Chinese Federation of Logistics and Purchases revealed that the Purchasing Manager Index rose for the third straight month in February, kindling hopes of an earlier-than-expected recovery in China.

In Japan, equity market climbed up o after dipping down yesterday. Japanese Nikkei 225 Stock Average index increased 61.24 points, or 0.85%, to 7,290.96, while the broader Topix added 5.24 points, or 0.72%, to 732.04.

In Mainland China, equity markets staged a tremendous rally to end up more than 6% as expectations that more government stimulus policies would be released soon. Chinese Federation of Logistics and Purchases also revealed that the Purchasing Manager Index rose for the third straight month in February, kindling hopes of an earlier-than-expected recovery in China. Strong gains in property, banks, airliners and auto pushed the Chinese markets up after a positive opening and market added to the gains throughout the day.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, gained 6.12% or 126.68 points to 2,198.11 points after hitting a high of 2,201.73.The Shenzhen Component Index on the smaller Shenzhen Stock Exchange increased 6.91% or 532.07 points to 8,227.69 points, after touching an intraday low of 7,742.67 points.

In Hong Kong, share prices extended gains to end the day higher amid hopes Beijing will unveil more measures to support the economy in the current legislative meeting. The Hang Seng Index ended jumped by 297.27 points, or 2.47%, to 12,331.15, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, added 330.80 points, or 5% to 6,948.37

In Australia, stock market tracked a new five year low, after the Australian economy registered its first contraction in eight years, extending economic woes of the investors and the policy makers. Financial stocks continued to bore the brunt of market mayhem as investors dumped the banking stocks. The benchmark S&P/ASX200 fall of 52.8 points or 1.6% ending the day at 3,166.40 – the closing level since November 2003. The broader All Ordinaries slumped 45.5 points or 1.4% closing at 3,125.90 – the lowest close since August 2003.

On the economic front, the Australian economy is odds-on to enter recession after contracting for the first time in eight years. According to the data release by the Australian Bureau of Statistics the real gross domestic product (GDP) fell by a seasonally adjusted 0.5% in the December quarter - the first negative quarter of economic growth since the December quarter of 2000, when the economy shrunk by 0.9%. Over the year to December 2008, GDP rose by 0.3%. The September quarter figures were unchanged at a 0.1% rise.

In another release, activity in the services industry showed a further contraction as the global financial crisis keeps consumers at home. The Australian Industry Group-Commonwealth Bank performance of services index (PSI) fell 8.8 index points in February to 32.2 points. It was the 11th straight month the index has come in below the key 50 levels that separates expansion from contraction.

Adding to the gloom, figures released today from the Federal Chamber of Automotive Industries show that new car sales slumped 21.9% in February compared with the same month last year. Today's data is the latest dose of bad news for the industry, which has been beset by problems both here and internationally.

Despite of all this gloom, the Reserve Bank of Australia (RBA) says 2009 is shaping as a very difficult year for the global economy but Australia is well placed to cope with the slowdown underway. RBA assistant governor of economics Malcolm Edey has told a business forum in Sydney that Australia is expected to suffer some significant short-term weakness due to the sudden deterioration in global conditions in the final three months of calendar 2008.

In New Zealand, equities climbed up after registering a downfall by more than 2.5% yesterday in line with most of the world markets. At the closing bell, the benchmark NZX50 increased 2.13% or 51.397 points to close at 2469.343. The NZX 15 rose 2.57% or 116.750 points to 4656.516.

In South Korea, stock market closed higher for the second straight session, on hopes for additional stimulus plans from China, with gains led by steel and shipbuilding issues including Hyundai steel and Daewoo Shipbuilding. The Korea Composite Stock Price Index increased by 33.69 points or 3.29% closing the day at 1,059.26, up from earlier near-2% losses to a low of 1,008.67.

On the economic front, according to estimates by seven local economic institutions, including the state-run Korea Development Institute (KDI), Asia's fourth-largest economy is projected to shrink between 5 – 8% in the current quarter from a year earlier.

In Taiwan, stock market continued its upward run, posting its best percentage gain in more than two weeks, as chip designer Mediatek led technology shares higher after the firm raised its first-quarter sales forecasts. The main Taiex share index continued gaining as it added 106.08 points or 2.39% at 4,541.42, posting the highest percentage gain since 13 February 2009 when market spurted by 2.82%.

On the economic front, the long-term unemployed population in Taiwan hit a four-year high of 87,000 in January this year, 26% of which has college or above education for the highest proportion among the other categories in educational level.

In Philippines, the stock market sustained its upward rally for the second consecutive day, buoyed by the positive investors sentiments in tandem with positive news of rate cuts by the monetary board. Moreover, massive gains in the services index also assisted the PSEi to scale up. The benchmark index PSEi ascended 1.39% or 25.94 points to 1,885.92, while the All Shares index rose 0.59% or 7.20 points to 1,212.44.

On the economic front, year-on-year growth rate of the General Wholesale Price Index (GWPI) continued to post a slower rate of 1.8 % in December from 4.4 % in November. This was effected by the negative annual growth rates correspondingly registered in the crude materials, inedible except fuels and mineral fuels, lubricants and related materials index at -1.7 % and -15.0 % in December from their respective November rates of -0.8 % and -3.7 %.

The average annual growth rate of the GWPI in 2008 accelerated to 11.9 % compared to 3.2 % a year ago. This was brought about by higher average annual growth rates registered in all the commodity groups.

In India, the key benchmark indices scored with small gains on rebound in world stocks. The BSE 30-share Sensex closed up 19.20 points, or 0.23%, to 8,446.49. At the day's low of 8,373.24 the Sensex lost 54.05 points in early afternoon trade, its lowest since 20 November 2008. The S&P CNX Nifty was up 22.80 points, or 0.87%, to 2,645.20.

Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.21% or 1.81 points to 866.93, while Indonesia’s Jakarta composite increased by 24.56 points or 1.94% to 1,289.38. In Thailand, the Thai Stock exchange added 4.77 points or 1.15% to 417.86.

In other regional market, European shares swung higher in early trading Wednesday, partially rebounding from multi-year lows as commodity producers advanced. National equity markets were also higher, with the U.K. FTSE 100 index up 1.7% at 3,572.50, the German DAX 30 index up 1.8% at 3,756.89 and the French CAC-40 index up 1.8% at 2,599.80