Asian markets tanked on Tuesday

Sensex, Shanghai, Seoul, Sydney book losses as Nikkei, Hang Seng accompanies them

Stock markets in Asian region tumbled on Tuesday, 27 October 2009, witnessing broad-based selling on concerns the recent rally in global equities has outpaced the outlook for earnings and the global economy. Energy and metal stocks bore the brunt of the selling pressure hurt by weakening commodity prices. Exporters came under selling pressure on fears U.S. lawmakers may let a federal homebuyer tax credit expire. Financial stocks fell tracking weakness among their U.S. peers overnight. Investors awaited U.S. GDP data due out later this week for further cues about the near-term direction of the markets.

On Wall Street, stocks were unable to recover as investors reacted to a round of bank downgrades and a strengthening dollar. The Dow Jones Industrial Average lost 104.22 points, or 1.1%, to 9,867.96, while the S&P 500 edged down 12.66 points, or 1.2%, to 1066.94. The Nasdaq gave up 12.62 points, or 0.6%, to 2141.85.

In the commodity market, crude oil traded below $79 a barrel after falling the most in a month as prices rose at a faster pace than a recovery in demand.

Crude oil for December delivery was at $78.79 a barrel, up 11 cents, at 3:18 p.m. Singapore time. Yesterday, it dropped $1.82, or 2.3%, to close at $78.68 a barrel on the New York Mercantile Exchange, the biggest decline since 24 September 2009 and the lowest settlement since 16 October 2009.

Brent crude oil for December settlement was at $77.37 a barrel, up 11 cents, on the London-based ICE Futures Europe exchange at 3:14 p.m. Singapore time. Yesterday it declined $1.66, or 2.1%, to end the session at $77.26 a barrel.

Gold, little changed in London, may rebound from its biggest drop in almost three months as a weaker dollar revives demand for the precious metal as an alternative investment. Gold for immediate delivery added $1.75, or 0.2%, to $1,040.25 an ounce by 8:55 a.m. in London, after earlier gaining as much as 0.5%. December gold futures fell 0.2% to $1,040.60 an ounce on the New York Mercantile Exchange’s Comex division.

In the currency market, US dollar and Japanese yen rebounded strongly overnight on the back of sharp sell off in US stocks. Both currencies pare some gains after a Chinese spokesman said that industrial output might rise 16% in fourth quarter, triggering some risk seeking buying in Asian markets. But after all, Asia equities remain soft and retreat in dollar and yen is so far mild.

The US dollar stayed mostly above the 92-yen line after a fall in stocks and commodities price prompted investors to sell higher yielding currencies for the dollar, lifting it versus the yen as well. The Japanese yen was quoted at 91.9650 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7501 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 stayed well below recent 14-month peaks, hurt by profit taking in long positions by investors, although buying by funds and others at dips checked a sharper decline. At the local close, the dollar was trading at $US0.9188, recovering from a low of $US0.9125 but still down from yesterday’s close of $US0.9236. It had struck a 14-month high of $US0.9330 late last week.

In Wellington trade, the New Zealand dollar fell rapidly against the greenback early today, dropping back to levels it was at a week ago before its climb to a 15-month high last Thursday around US76.35c. The kiwi was buying US74.62c, having fallen around 1c during the day as the greenback strengthened on the back of falling stock and commodity prices.

The South Korean won ended at 1,184.40 won against the greenback, down 6.8 won from Monday's close of 1177.60 won.

The Taiwan dollar weakened against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 32.4800, 0.0460 down from Monday’s close of NT$32. 3940.

In the equity market, Asian shares closed mostly lower after Wall Street's decline, with energy-related stocks hit by a fall in crude oil prices.

In Japan, stocks fell sharply following losses on Wall Street overnight, with financial issues tracking their U.S. peers' decline and resource-related shares down on lower commodity prices. Japanese Nikkei 225 Stock Average index slumped 150.16 points, or 1.45%, to 10,212.46, while the broader Topix declined 15.24 points or 1.67%, to 895.48.

On the economic front, the Finance Ministry upgraded its overall assessment of the Japanese economy for the second straight quarter, the first time since 2004, citing a further rise in manufacturing production. For the July-September quarter, the ministry said that although the economy nationwide ''remains in a difficult situation, it showed some signs of picking up, such as an increase in production activity.’ “The ministry, however, maintained its pessimistic assessment of employment conditions for all 11 regions for the second consecutive quarter.

In Mainland China, equities slide sharply today as investors sold the shares heavily as dollar strengthened overseas and risk appetite wore off. The investors also gave a thumb down to a highly overheated property market in Hong Kong - on concerns that the policy makers in Asia will respond intensely to rising real estate values that threaten to mimic in Asia the U.S. mortgage bubble that roiled the global economy.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, declined 2.83% or 88.11 points to close at 3,021.46 points after fluctuating between 3,086.09 and 3,020.49 points. The Shenzhen Component Index on the smaller Shenzhen Stock Exchange fell 3.14% or 402.81 points to close at 12,412.45 points.

In Australia, stock market in Australia extended its losing streak in second straight session, led lower by miners and energy firms as commodities prices weakened. The strength of the US dollar and worries about a recovery in the world economy hit oil, gold and base metals prices, dragging resource stocks down. The benchmark S&P/ASX200 index was down 76.8 points, or 1.6%, at 4753.5, while the broader All Ordinaries fell 77.7 points, or 1.6%, to 4754.9.

On the economic front, business confidence in Australia rose to a 7-year high in the September quarter. As per a survey, published by National Australia Bank today, NAB’s business confidence index increased by 20 points to plus-16, the highest reading since Q1 of 2002. The index registered minus-4 in the June quarter. The bank's index of business conditions also improved, adding 14 points to a reading of plus-5, compared to minus nine in Q1.

In New Zealand, stock market toppled, resuming trade after the long weekend on Tuesday. The share market declined following losses on Wall Street amid fresh concerns about economic recovery. The NZX50 declined 0.57% or 18.40 points to 3192.47. The NZX 15 decreased 0.72% or 41.45 points to close at 5783.15.

On the economic front, New Zealand Prime Minister John Key said the nation’s currency is overvalued and the central bank is unlikely to raise interest rates this year because inflation is contained. Meanwhile, the New Zealand dollar is expected to continue to fall this week as speculation that the US Federal Reserve will tighten monetary policy earlier than expected stokes the appeal of the greenback and appetite for higher-yielding, or riskier, assets dims.

In South Korea, stocks closed lower as institutional investors dumped tech and bank shares following overnight falls in U.S. markets. The benchmark Korea Composite Stock Price Index (KOSPI) fell 7.58 points to 1,649.53.

In Taiwan, stock markets in Taiwan were unable to sustain recent gains as went back to losses, despite of positive economic data conforming an upheaval in consumer confidence, as construction and cement sector outstripped gains posted by tourism and electronics sector. The benchmark Taiex share index snapped its winning streak as it finished lower by 11.06 points or 0.14% in a day, closing the day at 7657.34.

On the economic front, Taiwan’s consumer confidence in October rose to its highest level in 17 months, another indication that the country's economy may be pulling out of a prolonged slump set off by the global economic meltdown.

According to the results of the monthly survey released by National Central University's Research Center for Taiwan's Economic Development (RCTED), the consumer confidence index for October stood at 60.56, up 4.11 points from the September level and the highest since June 2008.

In Philippines, the stock market closed lower in line with the regional market as investor's took cue from the losses on Wall Street overnight, which in turn led to selling of key heavy weight stocks. However, there was some buying seen in the holdings firms stocks and financial stocks. There are some concerns about the rising inflationary pressures as the Philippine central bank recently said the risk of faster inflation may be narrowing the scope for maintaining interest rates too low for too long. At the final bell, the benchmark index PSEi lost 0.19% or 5.79 points to 2,935.74, while the All Shares index declined 0.31% or 5.83 points to 1,846.71.

On the economic front, merchandise imports continued to fall in August, although at a softer annual decline of 28.3% against the previous month's 31.6% contraction, on hefty drops in imports of electronics and petroleum products. The value of imports in August was at $3.62 billion, down from $5.04 billion recorded last year, the National Statistics Office reported.

The total external trade in goods reached $52.012 billion for January to August 2009, a 30.6 % drop from $74.946 billion recorded during the same 8-month period in 2008. Total imports posted a 30.8 % annual decrease from $40.492 billion to $28.007 billion. Total exports likewise plunged by 30.3 % from $34.454 billion in January to August of 2008 to $24.005 billion. Thus, the balance of trade in goods (BOT-G) for the Philippines recorded a $4.002 billion deficit in 2009 from $6.037 billion deficit in the same 8-month period last year.

In India, the key benchmark indices tumbled after the Reserve Bank of India started to withdraw emergency liquidity support measures that were implemented in the aftermath of the global financial crisis. The RBI had pumped in massive liquidity in the banking system in the past one year or so to help revive the domestic economy in the aftermath of the global financial crisis. The central bank warned of possible asset price bubbles, raised banks' provisioning requirements for commercial real estate loans and lifted inflation forecast. The BSE 30-share Sensex was down 387.10 points or 2.31% to 16,353.40. The S&P CNX Nifty was down 124.20 points or 2.50% to 4,846.70.

The Reserve Bank kept its benchmark lending and borrowing rates on hold at a quarterly monetary policy review on today. It also kept steady cash reserve ratio at 5% but raised the statutory liquidity ratio to 25% from 24% with effect from 7 November 2009. Funds in CRR fetch no return for banks, while returns from SLR are small. The central bank said an accommodative monetary policy stance is required as the ongoing economic recovery was "fragile"

The RBI kept 2009/10 GDP forecast at 6% with upside bias and said it sees modest decline in agriculture. The RBI raised projection of inflation to 6.5% with an upside bias at end March 2010 from earlier 5%. The RBI said bank credit remained sluggish and it cut its forecast for adjusted non-food credit growth in 2009/10 to 18% from 20%.

Elsewhere, Malaysia's Kula Lumpur Composite index was trading higher at 1260.30 while stock markets in Indonesia’s Jakarta Composite index ended the day lower at 2425.20. Singapore’s Straits Times Index ended lower at 2,694.50.

In other regional market, European shares rose modestly, as BP led a strong performance from the oil and gas sector, with the move offsetting more losses for banks. The U.K. FTSE 100 index rose 0.4% or 20.38 points to 5,212, the French CAC-40 index rose 0.4% or 13.40 points to 3,758 and the German DAX index advanced 0.3% or 16.87 points to 5,659.