Wednesday woes continues to whacks Asian Markets

Sensex, Hang Seng secure losses while Nikkei, Shanghai make additions

Stock market in Asian region witnessed another session of losses on Wednesday, 17 June 2009, as investors continued heavy selling amid renewed concerns over the state of global economy.

The much-hyped Brazil, Russia, India, and China (BRIC) summit failed to deliver little surprise to the markets. The statement called for a stable, predictable and more diversified currency system, and emerging economies to have greater voice and representation in international financial institutions. However, there is no mentioning of the possibility of lessening of dollar's influence, nor anything about investing BRIC’s reserve in each other's bond.

In addition, the regional markets tried to echoed the sentiments on Wall Street which tumbled down after the fall in U.S. industrial output on the back of a sharp drop in capacity utilization.

On Wall Street, the major indices extended their losses by more than 1% Tuesday, as better than expected housing and inflation data were offset by unimpressive gauges on output and more of the same economic concerns. The Dow Jones Industrial Average finished 107.46 points lower, or 1.3%, at 8504.67, while the S&P 500 was off by 11.75 points, or 1.3%, at 911.97. The Nasdaq fell 20.20 points, or 1.1%, to 1796.18.

On the economic front, the Department of Commerce reported that housing starts and permits increased more than expected in May, offering signs of improvement in the sector. There were 532,000 new housing starts, up from 454,000 in April, while permits increased to 518,000 from 494,000.

But the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) declined a point to 15 in June as homebuilders faced the recent upturn in interest rates and the lack of credit for housing production loans, according to a report earlier in the week.

Meanwhile, the producer price index, which measures prices of goods at the wholesale level, ticked up 0.2% in May. Excluding food and energy, it fell 0.1%. Other data, however, did little to excite investors. Capacity utilization fell from 69% to 68.3% in May, and industrial production fell 1.1% after a 0.7% decreases the month prior.

In the commodity market, crude oil traded little changed before a report forecast to show that crude supplies contracted for a second week in the U.S., the world’s largest energy consumer.

Crude oil for July delivery traded for $70.60 a barrel, 13 cents higher, on the New York Mercantile Exchange at 9:16 a.m. London time, after climbing as high as $71.28. The contract rose to a seven-month high of $73.23 on 11 June 2009.

Brent crude for August settlement was at $70.44 a barrel, 20 cents higher, on London’s ICE Futures Europe exchange at 9:13 a.m. London time.

Gold recovered a bit after felling for a fifth time in six days as the strengthening dollar reduced demand for the precious metal as a haven investment. Gold for immediate delivery was at $936.50 an ounce at 1:53 p.m. in Singapore after declining as much as 0.4% to $931.37 an ounce earlier.

In the currency market, US dollar bounded in tight range against major currencies in general. Japanese yen weakens mildly after following rebound in Asia stocks but the depth of the retreat is so far shallow. The developments suggest that some more sideway trading will likely be seen in near term.

The Japanese yen strengthened against its major counterparts on Wednesday. The Japanese currency quoted at 96.48 against greenback.

The Hong Kong dollar was trading at HK$ 7.7504 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 closed slightly higher on Wednesday, despite investors shying away from the risk sensitive currency during most of the local session. At the local close, the dollar was trading at $US0.7993, up slightly from Tuesday's close of $US0.7944. During the domestic session, the unit moved between $US0.7877 and $US0.7992.

In Wellington trades, the New Zealand dollar held around US63c in mixed trading today as investors globally continued to debate the speed and timing of an economic recovery.

The NZ dollar dipped briefly after Reserve Bank Governor Alan Bollard said, "If markets are buying the New Zealand dollar on the expectation of a strong recovery they may end up being disappointed".

The comment was seen as an attempt to talk down the NZ dollar but it didn't work for long. At the regional closing, the NZ dollar was buying US63.05c from US63.13c I the morning. It climbed from a low point around US62.40c early yesterday afternoon.

The South Korean won ended at 1,259.8 won to the dollar, down 2.3 won from Tuesday's close, as demand grew for safer bets amid falling local stocks

The Taiwan dollar weakened slightly against the greenback. The Taiwan dollar fell against the US dollar as it closed trading lower at NT$ 32.8890, down by NT$ 0.040 from Tuesday’s close of NT$32.8850.

Coming back in equities, Asian share markets finished mostly lower, as investors remained wary of the size of recent stock market gains, but trading ended higher in Tokyo as fresh talk about an improving economy helped rescue the market from a third day of losses.

In Japan, the stock index surged, shrugging off negative overnight cues from Wall Street as investors chased bargain following yesterday sell off. Shares of metal products, non-ferrous, iron & Steel, and oil & coal products led the rally on bottom fishing amid hopes higher prices of copper and nickel might boost profit. Rubber products and paper makers surged on expectation the decline in oil prices would trim manufacturing costs.

At the closing bell, the Nikkei 225 Stock Average index rebounded 87.97 points, or 0.9% to 9,840.85, while the broader Topix index rose 8.27 points, or 0.9% to 923.

On the economic front, the Bank of Japan on Tuesday retained its uncollateralized overnight call rate at 0.1%. Commenting on the economic assessment, BOJ stated that amid continuing weakness in economic conditions, exports and production are beginning to level out against the backdrop of progress in inventory adjustments.

In Mainland China, stock index reversed early losses to finish higher, with broadcasted bottom fishing across the board. Properties led the rally, with strong gains in China Vanke on signs of strong real estate sales.

Financials surged on bargain hunting after President Hu Jintao said Beijing’s stimulus is showing results. Meanwhile energy shares zoomed as crude oil heading toward eight month high in Asian trading. Shares of pharma companies rose on speculation that the spread of the swine flu pandemic would drive sales.

The Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, jumped 1.2%, or 34.1 points, to 2,810.12, while the Shenzhen Component Index climbed up 2.25%, or 243.29 points, to 11,040.49.

On the economic front, Chinese President Hu Jintao said on Tuesday that China would provide a 10-billion-U.S. dollar credit loan to member states of the Shanghai Cooperation Organization (SCO) to shore up their economies amid the global financial crisis.

In Hong Kong, the stock market tumbled, enduring loses for third consecutive day, with broad based slumps in properties and commerce and industry issues on weaker commodity prices and worries that the economic recovery's pace might not be as strong as initially hoped.

The Hang Seng Index tumbled 80.908 points, or 0.45%, to 18,084.6, while the Hang Seng China Enterprise Index melted 16.17 points, or 0.15% to 10,700.15.

In Australia, the stock market tumbled; extending loosing streak for third consecutive day on tracking falls on Wall Street overnight and weaker commodity prices. Shares of miners, materials and resources, energy dragged down the market after pullback in commodities and crude oil prices amid concerns about the pace of any economic recovery.

At the closing bell, the benchmark S&P/ASX200 index stumbled 58.4 points, or 1.47%, to 3,904.1, while the broader All Ordinaries tumbled 53.7 points, or 1.36%, to 3,904.2.

In New Zealand, stock market dipped down in line with most of the Asian markets that fell following a dull day on the Wall Street overnight. The NZ benchmark index registered a fall for the second consecutive session in a row. Asian share markets were mostly lower as uncertainty about the global economy hampered investor sentiments. The NZX50 fell 0.29% or 8.115 points to 2778.04. The NZX 15 was down 0.41% or 20.659 points to close at 5054.77.

On the economic front, speaking to a Wellington business, Reserve Bank Governor Alan Bollard said the global economy appeared more stable, with growth forecasts for trading partners appearing to have finished their freefall. He expects the economy to begin growing again toward the end of the year, but the recovery is likely to be slow and drawn out. He also said that business activity is near its low point, but any recovery could be ‘erratic'.

In South Korea, stocks closed lower as sliding U.S. markets raised fears that an economic recovery will take more time than expected, sparking sell offs in steel and financial shares. The benchmark Korea Composite Stock Price Index (KOSPI) slid 7.98 points to 1,391.17.

In Singapore, the stocks index erased, extended losing streak for third day, on tracking falls on Wall Street overnight and other Asian bourses and weaker commodity prices as investors worried that the economic recovery's pace might not be as strong as initially hoped. Lower commodity prices and valuation concerns following recent run up also impacted market sentiment. The blue chip Straits Times Index eased 16.71 points, or 0.73%, to 2,271.45.

In Taiwan, stock market broadened its losses for the fourth consecutive session as semiconductor and tourism sector lead the sectoral index dragging the index lower. In the opening trade, the Taiex tried to buck the negative lead from Wall Street with good gains, however it couldn’t sustain it, turning it lower towards the end.

The main Taiex share index stretched its downward trend for another session as the Taiex index fell 24.90 points or 0.40%, closing the day at 6195.91, another lowest closing since 30 April 2009 when market closed at 5992.57.

In Philippines, the stock market nose-dived for the second consecutive day, closing nearly 3% lower, as investors remained cautious about the country’s economic prospects. Moreover, the composite index also tracked the overnight losses on Wall Street. At the final bell, the benchmark index PSEi plummeted 2.88% or 72.42 points to 2,441.75, while the All Shares index fell 2.25% or 36.39 points to 1,575.87.

On the economic front, Philippines recorded a balance of payments deficit of $55 million in May after a surplus of $466 million in April. The cumulative surplus in the five months to May has reached $2.143 billion. The BSP has predicted a BOP surplus of $700 million this year. The overall BOP surplus in 2008 fell to a four-year low of $89 million after a record $8.58 billion in 2007.

As of March 2009, the National Government debt increased by 1.5 % or P65 billion from the end February 2009 level. Total outstanding debt stood at P4.229 trillion of which, P1.842 trillion or 44% is owed to foreign creditors and P2.387 trillion or 56% to domestic creditors. The domestic debt increased by P93 billion or 4.1% from the recorded end February 2009 level arising from the net issuance of government securities made by NG.

In India, the key benchmark indices tumbled in the last one-hour of trade tracking weak stocks. The BSE 30-share Sensex went down 435.07 points, or 2.91%, to 14,522.84. The S&P CNX Nifty declined by 161.65 points or 3.58% to 4,356.15.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 0.30% or 3.22 points to 1070.90 while Indonesia’s Jakarta composite index ended the day lower at 2024.96.

In other regional market, European shares edged lower; with mineral extractors declining as investors fretted about the economic backdrop and British supermarket group J. Sainsbury was under pressure after announcing that it will ask shareholders for capital. The U.K. FTSE 100 index fell 0.3% to 4,317.62, the German DAX 30 index lost 0.5% to 4,868.52 and the French CAC-40 index fell 0.5% to 3,198.85.

Looking ahead, events in UK will be the main focus in the European session today. The number of UK claimants is expected to rise in May. Bank of England minutes will be released. Other data include Swiss ZEW and Euro zone trade balance.

In US, we have a data release showing the Consumer price index that is expected to rise in May as driven by rally in retail gasoline price. Gasoline price has surged 10.6% in May and after seasonal adjustment, the gasoline component of CPI should have risen 4%. Other components remained soft but the pace of decline probably slowed down.