Asian Markets witness another Mute Monday

G-8's early exit strategy on signs of stabilization and IMF's Strauss Kahn warning on weak recovery kept investors cautious

Stock market in Asian region witnessed another mute Monday on 15 June 2009, as most of the regional stock markets ended the day lower, after G-8 finance ministers discussed the need to prepare appropriate strategies for unwinding the extraordinary policy measures taken to respond to the crisis once the recovery is assured. These “exit strategies” will vary from country to country, are essential to promote a sustainable recovery over the long term.

G8 finance ministers acknowledged "signs of stabilization" in the global economy and said that the IMF should now study the best way to roll back from the prior crisis stimulus measures taken even though it's still early to shift strategies.

US Treasury Geithner said that the policy actions have brought a very important "reduction" in concern of deep global recession, reduced deflation risks and systematic risks in financial system. But it's not a point where "we can say we have a recovery in place".

However, participants remained cautious in stock specific activity following statement issued by UK Finance Minister Darling said there would be a return to growth towards of the year but "we're not there yet". IMF MD Strauss-Kahn said recovery is "weak" and many actions still need to be taken. Growth as average will only come back at beginning of 2010 and unemployment will peak at start of 2011.

On Wall Street, it was a quiet week for the US market that ended on a relatively steady note on Friday. Indices managed little gains for the week. For the day, stocks spent most of the session confined to a narrow trading range in negative territory, but managed to move higher heading into the final leg of trading.

The Dow Jones Industrial Average ended higher by 28.3 points at 8,799.26. The Nasdaq Composite Index, ended lower by 3.5 points at 1,858.8. S&P 500 ended higher 1.3 points at 946.2.

For the week, The Dow Jones Industrial Average gained 36.14 points (0.4%) for the week to end at 8,799.26. Tech - heavy Nasdaq gained 9.38 (0.5%) to end at 1,858.8. S&P 500 gained 6.12 (0.7%) to end at 946.21.

In the commodity market, crude oil fell for a second day on speculation its dollar-driven rally to a seven-month high last week-outpaced prospect for a recovery in fuel demand.

Crude oil for July delivery dropped as much as $1.20, or 1.7%, to $70.84 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $71.05 a barrel at 3 p.m. in Singapore. The contract fell 0.9% to $72.04 a barrel on June 12, its first decline in four days, after a plunge in European industrial production dented confidence in the global recovery and boosted the dollar, reducing the investment appeal of commodities. Oil reached $73.23 on June 11, the highest in seven months.

Brent crude for July delivery fell as much as $1.07, or 1.5%, to $69.85 a barrel on London’s ICE Futures Europe exchange. The contract expires today. The more actively traded August contract declined as much as $1.10, or 1.5%, to $70.70 a barrel.

Gold declined to the lowest in more than three weeks as a rallying dollar eroded interest in the precious metal as a haven investment. Gold for immediate delivery fell as much as 0.4% to $935.20 an ounce, the lowest since 20 May 2009, and was at $937.18 by 8:30 a.m. in Singapore.

In the currency market, US dollar starts the week with some strength on comments from Russia and pull back in oil prices. Just ahead of BRIC summit, Russian Finance Minister Kudrin said that it's "too early" to speak of an alternative for dollar as reserve currency and fundamentals of the greenback are still in "good shape". Kudrin also said there is no plan to change the structure of Russia's investments significantly in the near future.

The Japanese yen eased against major currencies on Monday. The Japanese currency quoted at 98.41 against greenback.

The Hong Kong dollar was trading at HK$ 7.7506 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 trade, the Australian dollar fell over a cent on Monday, dragged down by weaker stock markets, a stronger US dollar and lackluster commodity prices. At the local close, the dollar was trading at 80.38 US cents, down from Friday's close of 81.52 cents. It tumbled in the last hour of local trade, hindered by a firmer US dollar that posted its sharpest one-day gain in a week on Monday.

In Wellington trades, the New Zealand dollar closed slightly down against the greenback, following statements by Russian and Japanese finance ministers supporting the US dollar at the G-8 conference. The kiwi closed the local session at US63.75c, down from US64.25c on Friday night, while edging up against the aussie to A78.97c, from A78.95c.

The South Korean won ended at 1,262 won to the dollar, down 8.1 won from Friday's close, as offshore investors picked up the greenback for safer bets amid setbacks in stock markets and renewed geopolitical concerns following North Korea's nuclear test last month.

The Taiwan dollar weakened faster. The Taiwan dollar fell against the US dollar as it was trading lower at NT$ 32.940, down by NT$ 0.140 from Thursday’s close of NT$32.800.

Coming back in equities, Asian equities closed mostly lower in subdued trade, with energy and mining stocks slipping in Sydney and Tokyo but other sectors of the market finding some rotational buyers.

In Japan, the stock index dropped, as investors prompted for booking profit after key benchmark index exceed psychologically important 10,000 lines last week, though losses were curbed, as investor sentiment remains upbeat amid reinforced hopes about a recovery from the global recession. The Nikkei 225 Stock Average index dived 96.15 points, or 0.95% to 10,039.67, while the broader Topix index shed 3.72 points, or 0.4% to 946.82.

In Mainland China, stock index closed off an early low by finishing the session higher, snapping two days of loosing streak, with eight of ten sector ended in green terrain amid hopes of furthers stimulus aid from the government after the Chinese officials signaled government will continue to ensure sufficient liquidity to bolster domestic demand and sustain economic growth. The market also bounced on sustained optimism about global economic recovery.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, climbed up 1.67%, or 45.78 points, to 2,789.54, meanwhile the Shenzhen Component Index added 2.33%, or 244.83 points, to 10,768.96.

On the economic front, China's Ministry of Commerce said that the amount of used foreign direct investment (FDI) fell 20.4 percent to stand at $34.05 billion year on year in the first five months in China. In May alone, the investment dropped 17.8 percent to $6.38 billion, the eighth straight monthly fall.

In Hong Kong, the stock market plummeted, snapped three days of winning streak as investors prompted for profit booking across the sector after index touched nine months high last week. Major heavyweight were sold for gains as investors speculated that this year’s rally has outpaced prospects for growth in the economy and corporate earnings.

The Hang Seng Index tumbled 390.72 points, or 2.07%, to 18,498.96, while the Hang Seng China Enterprise Index melted 211.23 points, or 1.9% to 10,877.54.

In Australia, the stock market tumbled, snapped three days of winning streak, pressured by weak commodity prices and on concern major capital raisings drained cash from the market. Shares of materials and resource trimmed as investors intended on harvesting profits after pullback in commodity prices, meanwhile the energy sector has eased with crude oil falling from eight month highs.

At the closing bell, the benchmark S&P/ASX200 index melted 30.5 points, or 0.75%, to 4,031.7, while the broader All Ordinaries dived 31.1 points, or 0.77%, to 4,030.4.

On the economic front, the Australian Bureau of Statistic said total personal finance commitments rose by 0.2% in April to A$6.27 billion. Monthly home loans rose for the seventh consecutive month, with housing finance commitments increasing 1.9%, while commercial credit slid 12.9%.

In New Zealand, equities commenced the week in the green terrain on Monday. The share market registered a second consecutive rise in a row. At the closing bell, the NZX50 advanced 0.55% or 15.33 points to 2825.15. The NZX 15 was up 0.64% or 32.93 points to close at 5151.01.

On the economic front, New Zealand’s bank profits have fallen during the recession, according to BNZ chief executive Andrew Thorburn despite politicians arguing that interest rate cuts have not been passed on to customers. Reserve Bank Governor Alan Bollard announced on Thursday the official cash rate (OCR) would stay at 2.5 percent. "Despite the fact that we kept rates on hold this week we do still believe there is room for banks to cut their short term rates, bearing in mind that they haven't moved since our last 50 basis point cut in the April OCR review," Dr Bollard said.

Meanwhile, New Zealand manufacturing sales rose for the first time in five quarters, led by increased production in the meat and dairy industries. However, the figures for the March quarter published today are being described as "awful", despite volumes showing a small increase. Total seasonally adjusted manufacturing sales volumes were up 0.2 percent from the previous three months. The two other industries with increases were petroleum and industrial chemicals, and beverages, malt and tobacco.

New Zealand’s service sector remains in the shadows, but activity doesn’t appear to be getting any darker, according to the BNZ Capital - Business NZ Performance of Services Index (PSI). Business NZ chief executive Phil O’Reilly said that the May result reinforced views that the level of carnage seen in the services sector abroad hasn’t been as bad in New Zealand. The PSI for May stood at 46.2, which was 2.5 points up from April, and almost identical to the February 2009 result.

In South Korea, stocks closed t lower as investors dumped banks and shipbuilders amid lingering jitters over an economic recovery. The benchmark Korea Composite Stock Price Index (KOSPI) declined 16.17 points to 1,412.42.

In Singapore, the stocks index erased gains, with broad based sell off across the sector after the government reported the city’s employers had fired more workers last quarter than initially estimated and after the Group of Eight finance ministers signaled they may start to withdraw stimulus spending. Shares of resources and energy issue succumbed amid pullback in crude oil and metal prices. The blue chip Straits Times Index eased 60.51 points, or 2.55%, to 2,316.56.

On the economic front, the Singapore statistics department said the retail sales index plunged 11.7% in April as compared a year earlier as rising unemployment and the nation’s deepest economic slump in more than four decades led consumers to buy fewer cars and household equipment. Retail sales (seasonally adjusted) declined by 3.1% in April 2009 compared to March 2009. Excluding motor vehicles, retail sales (seasonally adjusted) rose by 1.1%.

The Ministry of Manpower said Singapore’s unemployment rate rose to 3.3% quarter ended March, up from 2.5% in the previous period as the global economic downturn took its toll on the city-state’s labour market. Employers cut 12,760 jobs and total employment contracted for the first time in almost six years.

In Taiwan, stock market in Taiwan broadened its worst weekly performance of 2009, posting its biggest daily drop in about one and half month, as investors judged a rally prompted by improved ties with China has overvalued earnings prospects. Investors sold shares across the board following recent rallies, sending heavyweights sharply lower.

The main Taiex share index extended its downward movement as the Taiex index tumbled 222.67 points or 3.45%, closing the day at 6225.56, the lowest closing since 30 April 2009 when market closed at 5992.57. It is also the biggest single-day percentage fall since 17 April 2009.

In Philippines, the stock market continued to take an uphill, closing marginally higher, assisted by selective buying in the key heavy weight stocks. The benchmark index PSEi escalated 0.54% or 14.05 points to 2,612.85, while the All Shares index mounted 1.15% or 18.98 points to 1,664.62.

In India, the key benchmark indices fell for the third straight day as investors cashed in on gains after a recent solid surge in stock prices. Weak global markets triggered profit taking. World stocks fell after a call from the world's top finance ministers to rein in unprecedented monetary and fiscal stimulus. The BSE 30-share Sensex closed down 362.42 points, or 2.38%, to 14,875.52. The S&P CNX Nifty went down 99.40 points or 2.17% to 4,484.

Elsewhere, Malaysia's Kula Lumpur Composite index was up 0.09% or 1.02 points to 1091.17 while Indonesia’s Jakarta composite index ended the day lower at 2069.88.

In other regional market, stocks in Europe traded lower on Monday as top finance ministers said they would look to end the unprecedented monetary and fiscal stimulus that has helped the global economy come close to stabilizing after the credit crunch. By region, the U.K. FTSE 100 index fell 1.7% to 4,368.10, the German DAX index fell 1.9% to 4,975.27 and the French CAC 40 dropped 1.8% to 3,267.39.