Asian Markets shrug off stress of Stress Test

Nikkei, Shanghai, Hang Seng Advance Further while Sensex bucked the regional trend

Stock market in Asian region closed the day mostly higher on Friday, 8 May 2009, as the results of much-awaited stress tests on 19 U.S. banks dispelled uncertainty and speculation surrounding the health of the U.S. banking sector. Investors were relieved that there were no nasty surprises. Upbeat readings on the job market and sales at major retailers in the United States also offered some support ahead of the weekend.

On Wall Street, the major stock averages closed 1% - 2% lower before the release of the much- publicized bank stress test results, which called for banks to raise capital levels by a combined $75 billion. The Dow Jones Industrial Average lost 102.43 points, or 1.2%, to 8409.85, while the S&P 500 gave up 12.17 points, or 1.3%, to 907.36. The Nasdaq was off by 42.86, or 2.4%, at 1716.24.

After the market closed, the Federal Reserve released the results of the stress tests, saying that after taking account of losses, revenue and reserve requirements, the banks needed to increase capital levels by $75 billion. The vast majority of that needs to be in the form of Tier 1 common capital. The four banks in need of the biggest buffer building were Bank of America with $33.9 billion, Wells Fargo with $13.7 billion, GMAC with $11.5 billion, and Citigroup with $5.5 billion. Nine of the 19 banks needed no capital, however

In the commodity market, crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the global economy may be starting to recover.

Crude oil has advanced this week after reports showed fewer Americans filed claims for unemployment benefits, China's manufacturing expanded for the first time in nine months and Australia's jobless rate unexpectedly dropped last month.

Crude oil for June delivery rose as much as 68 cents, or 1.2%, to $57.39 a barrel in electronic trading on the New York Mercantile Exchange, and was at $57.30 at 1:31 p.m. Singapore time.

Brent crude oil for June settlement rose as much as $1.33, or 2.4%, to $57.80 a barrel on London's ICE Futures Europe exchange. It was at $57.24 a barrel at 1:34 p.m. Singapore time. The contract climbed 32 cents, or 0.6%, to end the session at $56.47 a barrel, the highest settlement since 10 November 2009.

Gold rose in London, heading for a weekly gain, on speculation central-bank measures to revive economies will spur inflation and demand for bullion as a hedge. Gold for immediate delivery rose $3.25, or 0.4%, to $913.95 an ounce by 9:54 a.m. in London, set for a 3.1 percent gain this week.

In the currency market, the Japanese yen strengthen against its most major counterparts on Friday. The Japanese currency quoted at 99.4 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7500 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 closed higher on Friday, as the results of the US government's "stress tests'' fed global risk appetite. At the local close, the dollar was trading at $US0.7570, up from Thursday's close of $US0.7519.

In Wellington trades, the New Zealand dollar ended the day at US59.36c, up from US58.85c yesterday. The kiwi rose to US59.91c in overnight trading, its highest since 7 January 2009.

The South Koran won ended at 1,247 won against the U.S. dollar, up 15.3 won from Thursday's close, as foreign investors increased their holdings of Seoul stocks.

The Taiwan dollar continued to rally further. The Taiwan dollar strengthened against the US dollar as it was trading higher at NT$ 33.0240, up by NT$ 0.108 from Thursday's close of NT$33.132.

Coming back in equities, in Japan, stock markets ended at six- month high as gains in the shares of financials stocks on bolstering sentiments after US bank “stress test” results showed that capital needs were in line with market expectations.

Steel makers, nonferrous metal and other commodity related stocks dropped as metal and other commodities prices retreated overnight, while exporters and automakers dived as yen strengthened against greenback and disappointed earning report from Toyota. Shipping and other transport retaliated issues dived.

At the closing bell, the Nikkei 225 Stock Average index gained 47.13 points, or 0.5%, to 9,432.83, while the broader Topix index added 9.42 points, or 1.1% to 895.

In Mainland China, stock market recouped from early lows to finish the session higher, touched fresh nine-month high, led by financials and properties after the People's Bank of China pledged to keep money flowing into the financial system to sustain growth and as of US bank “stress test” results, which showed that capital needs were in line with market expectation. Energy issues climbed as crude oil prices extended gains above $57 a barrel on growing confidence about the global economy. Refiners rose on expectations of a fuel price hike.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, climbed up 1.1%, or 28.19 points, to close at 2,625.64. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange rose 0.73% or 74.12 points to close at 10,183.06 points.

In Hong Kong, the stock market recouped early losses to finish the choppy session higher, extending winning streak for seventh day in row, as gains in the shares of financials stocks on bolstering expectations for a recovery in the Chinese economy would revive demand and US bank “stress test” results showed that capital needs were inline with market expectation.

At the closing bell, the Hang Seng Index spurted 171.98 points, or 1%, to 17,389.87, while the Hang Seng China Enterprise Index, which tracks H shares of Chinese companies, rose 154.97 points, or 1.57% to 10,051.90.

In Australia, the stock market recouped from early lows to finish the session marginal higher, hit a fresh six- month closing high as bank stocks surged after stress tests helped remove uncertainty over the health of U.S. lenders. At the closing bell, the benchmark S&P/ASX200 index has gained 3 points, or 0.08%, to 3,941.7, while the broader All Ordinaries rose 7.50 points, or 0.19%, to 3,919.60.

In New Zealand, the share market had a positive week ending on Friday. At the closing bell, the benchmark NZX50 increased 0.64% or 18.265 points to close at 2873.13. The NZX 15 was up 0.55% or 28.697 points to close at 5292.60.

In South Korea, stock markets closed higher as stress test results on U.S. banks dispelled uncertainty surrounding the health of the banking system, analysts said. The local currency hit a 7-month high against the U.S. dollar. The benchmark Korea Composite Stock Price Index (KOSPI) advanced 11.05 points to 1,412.13.

In Singapore, the Singapore stocks finished the session lower, wiped out morning gains as investors prompted for profit booking after six consecutive days of strong rally. The market witnessed heavy volume pressure across the board, led by manufacturing and multi industries, meanwhile buying pressure was evident in banks and properties as the investors' sentiments were relatively positive to US bank “stress test” results, which showed that capital needs were lower than feared previously. At the closing bell, the blue chip Straits Times Index trimmed 3.39 points, or 0.15%, to 2,238.21.

On the economic front, the Monetary Authority of Singapore (MAS) today signed a Memorandum of Understanding (MoU) with Qatar Central Bank (QCB), which supervises financial institutions in Qatar.

In Taiwan, stock market successfully managed to end the session with marginal gains, ending the week at 8-months high, as technology shares including offsetting profit-taking in financials after a recent rally.

The main Taiex share index crawl further as Taiex added 11 points or 0.17%, closing the day at 6583.87, highest closing since 8 September 2008 when market closed the day at 6658.69, bringing gains in the past six days to 987 points, the most since 18 January 1991.

In Philippines, the stock market closed marginally higher reversing the early losses buoyed mainly by the weighty gains in the mining & oil index. Mining & oil index gained more than 3%. The benchmark index PSEi augmented 0.13% or 3.06 points to 2,241.98, while the All Shares index climbed 0.45% or 6.47 points to 1,443.10.

On the economic front, Government spending fell short of quarter one (Q1) target. Government spending was P6.9 billion short of its P361.9-billion program in the first three months, putting at risk its aim to front-load about two-thirds of planned expenditures in the first half in a bid to pump-prime the economy. Data released yesterday by the Department of Budget and Management (DBM) showed that actual disbursements in the first quarter totaled P355 billion, against the programmed expenditure budget of P361.9 billion for the period, even as it was 16.4% more than the P305.1 billion spent in the same period last year.

In India, key benchmark indices cut losses in late trade as European stocks extended gains and as US index futures jumped. Auto stocks recovered. The BSE 30-share Sensex was down 240.51 points or 1.98% to 11,876.43. The S&P CNX Nifty was down 63.20 points or 1.72% to 3,620.70.

Elsewhere, Malaysia's Kula Lumpur Composite index was up 0.32% or 3.31 points to 1026.78 while Indonesia's Jakarta composite index added 1.84% or 33.68 points ending the day at 1862.53.

In other regional market, European shares rose sharply, with banks leading that advance after formal results were released from U.S. bank stress tests and ahead of data expected to provide some pointers on the health of the U.S. economy. On a regional level, the German DAX 30 index rose 1.3% to 4,868.05, the French CAC-40 index advanced 1.2% to 3,291.36 and the U.K. FTSE 100 index climbed 0.9% to 4,438.45.

Looking ahead for the day, the US will release non-farm payroll data accompanied by statistics on unemployment rate. Canada will also release figure for unemployment rate.