Wednesday woes continues to whack Asian Markets

Doubt over global economic recovery triggers slump at Shanghai, Sensex, Hang Seng

Stock markets in Asian region slump on Wednesday, 19 August 2009, following the growing fears that global investors
are pulling the plug on a six-month rally amid doubts about a global economic recovery. Shanghai stocks tumbled to a two-month low on disappointment that authorities were not taking steps to support the market amid increasingly heavy losses while other regional stocks followed it.

On Wall Street, stocks witnessed a warmed back up on Tuesday after eyeing better-than-expected earnings reports and a silver lining in mixed economic data. The Dow Jones Industrial Average gained 82.07 points, or 0.9%, to 9217.41, while the S&P 500 tacked on 9.94 points, or 1%, to 989.67. The Nasdaq Composite edged up 25.08 points, or 1.3%, to 1955.92.

In the commodity market, crude oil traded little changed below $70 a barrel in New York after gaining as an industry-funded report showed a drop in crude inventories in the U.S., the world’s biggest energy consumer.

Crude oil for September delivery was trading down 3 cents at $69.16 a barrel on the New York Mercantile Exchange at 1:49 p.m. in Singapore. Earlier it rose as much as $1.31, or 1.9%, to $70.50 a barrel. Yesterday, it gained $2.44, or 3.7%, to settle at $69.19.

Brent crude oil for October settlement fell 44 cents to $71.93 a barrel on London’s ICE Futures Europe Exchange at 1:53 p.m. Singapore time. Earlier it rose as much as $1.14, or 1.6%, to $73.51 a barrel. The contract yesterday jumped $1.83, or 2.6%, to end the session at $72.37 a barrel.

Gold climbed for a second day as the dollar weakened on signs that the global recession is abating, reviving investors’ appetite for higher-yielding assets. Gold for immediate delivery, which tends to move inversely to the dollar, rose as much as 0.4% to $942.40 an ounce, and traded at $941.40 an ounce at 8:41 a.m. in Singapore.

In the currency market, US dollar and yen were logically boosted up on safe haven flow. The dollar and yen got a lift, as another sell-off in Chinese share markets sent risk-wary investors into the perceived safety of lower-yielding currencies.

The Japanese yen strengthened against greenback and euro as investors started buying Japan’s currency to take advantage of favorable exchange rates. The Japanese yen was quoted at 94.32 per greenback, while 133.06 per euro on Wednesday.

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 trade, the Australian dollar lost ground after a late fall in Chinese stocks got some investors worrying about the economic health of one of Australia's top export markets. The dollar retreated to close locally at $US0.8208, from the day's high of $0.8307, and compared to yesterday's close of $US0.8264.

In Wellington trade, the New Zealand dollar was mixed today, but generally recovered from recent lows as gains in stock markets worldwide-eroded safe-haven demand for the greenback and yen. The NZ dollar was buying US 67.57 cents at 5pm today from US 66.96 cents at the same time yesterday.

The South Korean won ended at 1,255.8 won to the U.S. dollar, down 9.5 won from Tuesday's close as foreigners shunned emerging currencies due to murky recovery predictions.

The Taiwan dollar weakened against the greenback. The Taiwan dollar fell against the US dollar as it was trading lower at NT$ 33.0100, down by NT$ 0.0460 from Tuesday’s close of NT$32.9640.

Coming back in equities, most of the Asian indices tanked dipper following the Shanghai slump that fed jitters over a potential deep correction.

In Japan, the shares market finished the session lower after trading most of the time in and out of boundary line, weighed down by major banks and real estate developers as investors sentiment remain fragile on the recovery’s strength and the mood was soured after the Shanghai market expanded losses. Insurance shares dived after regulators released new guidelines. Shipping companies turned lower after a gauge of transport fees fell overnight. At the closing bell, the Nikkei 225 Stock Average index slid 80.96 points, or 0.79% to 10,204, meanwhile the broader Topix index edged down 6.41 points, or 0.67% to 943.25.

In Mainland China, share market extended looses throughout the session on broad based sell off across the sector, as sentiment remained fragile after recent market losses. Materials, energy, and industrials dragged down the market as investors were prone to slashing their bets on riskier assets amid worries about declining international commodity prices and the strength of economic recovery after Shanghai bourse fell 19% in the last two weeks. Fears about restricted bank lending and the economic outlook weighed down banks and properties shares. Shipping companies turned lower after a gauge of transport fees fell overnight.

At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, declined 125.30 points, or 4.3% to 2,785.58, while the CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, fell 4.96%, or 157.42 points to 3,014.57.

In Hong Kong, benchmark index plummeted to one month closing low as market participants sentiment remained fragile after recent market losses and the mood was further soured after the Shanghai market expanded losses second times in this week. Investors were disappointed after the mainland authorities did not take steps to support the sliding share market. The Hang Seng Index retracted 352.04 points, or 1.73%, to 19,954.23, while the Hang Seng China Enterprise retreated 187.19 points, or 1.64%, to 11,260.83.

On the economic front, according to the Census and Statistics Department, Hong Kong’s seasonally adjusted unemployment rate was steady at 5.4% in the three months to July 2009.

In Australia, the stock market finished the session in mixed terrain despite spending much of the day in positive territory. Materials and resources tumbled as investors were prone to slashing their bets on riskier assets. Heavy profit booking witnessed among top four banks and miners offset gains from industrials, energy, and consumer discretionary shares.

At the closing bell, the benchmark S&P/ASX200 index slid 7.80 points, or 0.18%, to 4,373.8, meanwhile the broader All Ordinaries rose 1.6 points, or 0.04%, to 4,387.5.

On the economic front, the latest report from Westpac Bank and Melbourne Institute revealed that Australia’s leading index of economy activity contracted at an annualized rate of 3.3% in June compared to a fall of 5.3% in May. The leading index rose 1.8 index points to 247.9 points in June, meanwhile the coincident index declined at an annualized rate of 0.7% in June.

In New Zealand, stock market bucked the regional trend by ending the day in positive region. The New Zealand share market started the day in positive territory after US stocks rose overnight. Asian stock markets were mixed as a positive boost from gains for U.S. stocks was somewhat overshadowed by the uncertain outlook. The NZX50 was up 0.31% or 9.46 points to 3081.05. The NZX 15 moved forward 0.55% or 30.77 points to close at 5673.44.

On the economic front, New Zealand’s producers’ output prices fell 0.7% in the June 2009 quarter, while input prices remained unchanged, Statistics New Zealand said on Wednesday. In the year to the June 2009 quarter, the PPI outputs index rose 2.1% while the PPI inputs index fell 1.2%. This is the first annual fall in the PPI inputs index since a fall of 0.3% in the year to the March 2004 quarter.

Meanwhile, New Zealand’s capital goods price index (CGPI) rose 0.3% in the June 2009 quarter. The CGPI rose 4.1% in the year to the June 2009 quarter, compared with rises of 3.1% in the year to the June 2008 quarter and 2.8% in the year to the June 2007 quarter.

In South Korea, stocks closed lower as falling Asian shares fed jitters over a potential deep correction. In volatile trading, the benchmark Korea Composite Stock Price Index (KOSPI) declined 4.28 points to end at 1,545.96.

In Singapore, the stock market tumbled with broad based sell off across the sector as investors sentiment remained fragile about the strength of economic recovery and the mood was further soured after the Shanghai market expanded losses second times in this week. Banks, properties and manufacturing shares lead the decliners, as investors were prone to slashing their assets amid volatility in the global markets. The blue chip Straits Times Index slipped 44.94 points, or 1.75%, to 2,522.78.

In Taiwan, stock market struggled to keep gains as it finished the session slightly lower as worries over political uncertainty offset gains in contract notebook PC makers on expectations of new orders. The benchmark Taiex share index continued losing for the third session as it ended the session slightly lower by 1.19 points or 0.02% in a day, closing the day at 6788.58, lowest closing since 16 July 2009 when market closed the day at 6780.30

In Philippines, the stock market overturned its three days losses, closing higher, due to bargain hunting following a three-day downturn. Moreover, overnight recovery of Wall Street also acted as a helping hand or the Philippines equity to scale up. At the final bell, the benchmark index PSEi mounted 1.07% or 29.34 points to 2,760.89, while the All Shares index climbed 1.07% or 18.79 points to 1,765.63.

In India, key benchmark indices edged lower in choppy trade as world stocks fell led by a sharp slide in Chinese stocks. The BSE 30-share Sensex was down 225.62 points or 1.50% at 14,809.64. The S&P CNX Nifty was down 64.80 points or 1.45% to 4,394.10.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 0.8% or 8.88 points to 1155.53 while stock markets in Indonesia’s Jakarta Composite index ended the day lower at 2277.75.

In other regional market, European shares fell down for the second time this week, as investors moved to lock in profits, particularly in the mining and banking sectors. On a regional level, the U.K. FTSE 100 index declined 0.8% to 4,649.94, the German DAX index fell 1.3% to 5,183.77 and the French CAC-40 index declined 0.8% to 3,421.61.