Asian Markets turns timid on Thursday

Shanghai, Nikkei, Hang Seng finish in red while Sydney bucks regional trend

Stock markets in Asian region extended losses on Thursday, 17 December 2009, investors turn cautious after Hong Kong’s central bank said the city is at risk of sharp corrections in asset prices. Though overnight cues from Wall Street were mixed, the mood remains quite cautious in the region with a section of investors still remaining a bit concerned about the pace of economic recovery.

On Wall Street, stocks closed mixed, retreating after the Federal Open Market Committee announced that it will keep its key interest rate near zero. The Dow Jones Industrial Average lost 11 points, or 0.1%, to 10,441. The S&P 500 finished ahead by 1 point, or 0.1%, at 1109, while the Nasdaq rose 6 points, or 0.3%, to 2207.

On the economic front, the Fed reiterated that it will keep its fed funds rate at 0% to 0.25% and that conditions are likely to keep the rate exceptionally low for an extended period. In a slight turn of phrase, the central bankers' statement also noted that deterioration in the labor market is abating, though the typically cautious statement also cited a usual host of challenges to recovery.

In the commodity market, crude oil fell as the dollar strengthened against the euro, limiting the appeal of commodities as a currency hedge.

Crude oil for January delivery fell as much as 54 cents, or 0.7%, to $72.12 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.15 a barrel at 8:56 a.m. London time.

Brent crude oil for February settlement fell as much as 64 cents, or 0.9%, to $73.65 a barrel on the London-based ICE Futures Europe exchange. The contract was at $73.92 a barrel at 8:45 a.m. London time.

Gold declined, reversing early gains, as the dollar’s strength eroded demand for the precious metal as an alternative investment. Gold for immediate delivery dropped as much as 1.1% to $1,125.40 an ounce and traded at $1,128.20 at 3:30 p.m. in Singapore.

Earlier it climbed as much as 0.4% to $1,141.88 an ounce, 6.9% off its record of $1,226.56 reached 3 December 2009. February-delivery bullion on the Comex division of the New York Mercantile Exchange was 0.7% lower at $1,127.90 an ounce after gaining as much as 0.6% earlier.

In the currency market, the US dollar also rides on the weakness in Asia stocks to the news and strengthens across the board. The greenback is also lifted as recovery in gold fades again after breaching 1140 level briefly.

The Japanese yen was quoted at 89.90 against the US dollar. The U.S. dollar rose above the 90 yen line today morning for the first time since 7 December in Tokyo, after the Federal Reserve gave a better economic outlook, although it put off a rate hike as widely expected.

The Hong Kong dollar was trading at HK$ 7.7568 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 skidded to 11-week lows on Thursday as the US dollar cleared major chart levels on a range of currencies, triggering a wave of short covering in an illiquid year-end market. The Aussie crumbled to close locally at $US0.8892 from an early $US0.9012 high and $US0.8987 at Wednesday's close.

In Wellington trade, the New Zealand dollar fell today as the US dollar rose strongly against the euro. The euro is at its lowest level against the US dollar in three months. The NZ dollar was at US71.51c at 5pm, down from US72.01c at 8am and US71.76c at 5pm yesterday.

The South Korean won closed at 1,177.9 won to the U.S. dollar, down 13 won from Wednesday's close, as lingering uncertainties about the economy led investors to bet on safer assets.

The Taiwan dollar weakened further against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 32.3480, 0.0200 up from Tuesday’s close of NT$32.3280.

In equities, most of the Asian markets ended lower, with worries about a surge in supply of new shares and their impact on liquidity dragging Shanghai and Hong Kong lower.

In Japan, stock market ended in the negative terrain reversing gains, as banks dropped on investor concerns that yesterday’s gains were excessive. Investors pocketed profits on a rally in big banks. At the closing, Nikkei 225 Stock Average index fell 13.61 points, or 0.13%, to 10,163.80, while the broader Topix decreased 2.01 points or 0.22%, to 896.28.

On the economic front, Japan’s leading index for October was revised down to 89.4 from 89.7. However, the index stood above September's 87.5 and improved for the eighth straight month. At the same time, the coincident index came in at 94.3 in October, in line with the preliminary estimate. In September, the reading was 93.2. Further, the lagging index reading for October was revised to 83.7 from 84.8.

Japan’s value of household financial assets totaled 1,439.48 trillion yen at the end of September, down 0.7% year on year but a smaller decline than the 2.9% fall three months earlier, according to preliminary data. Household financial wealth began shrinking after hitting a record 1,571 trillion yen at the end of June 2007. In the three months through September, such assets contracted 0.2%.

In Mainland China, equities closed at three weeks low level, tumbling more than 2%, as the prospect of heavy new share supplies eroded sentiment. Moreover, many investors either remained on the sidelines or reduced their positions ahead of the year-end holidays. Furthermore, China’s bankers confidence index, which rose for the third straight month failed to support the composite index.

The Shanghai Composite Index ended down 76.14 points at 3,179.08, slipping for a third day in a row. The Shenzhen Component Index lost 2%, or 273.25 points, to close at 13,391.72 points.

On the economic front, Chinese bankers become more confident in the nation's macro-economy and expect a continuous economic up tick in the future, a survey by the central bank said. Bankers' confidence index (BCI) for the macro-economy rose for three straight quarters to 70.1 percent in the fourth quarter, 14.7 percentage points up from the third quarter, the People's Bank of China said. Bankers' macro-economic expectation index for the first quarter next year increased to 49.9 percent, 4 percentage points higher than a quarter ago.

In Hong Kong, stocks continued to extend their losses for a third session, as traders grew convinced of more action from the policymakers to tame overheated asset markets in the days to come. Hang Seng Index declined after the mainland's securities regulator gave its approval for a number of initial public offerings over the last few days. Financials and Property stocks led the losses. Weak cues from the US futures indices aggravated the selling in the closing hours.

At the closing bell, the Hang Seng Index stumbled 264.11 points, or 1.22%, to 21,347.63, meanwhile the Hang Seng China Enterprise, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, shrank 190.23 points, or 1.50%, to 12,501.20.

On the economic front, Hong Kong Monetary Authority (HKMA), the city's de factor central bank, today announced its benchmark interest rate will remain at 0.50%.

In Australia, stock markets continued to swing between gains and losses finishing marginally higher, as gains in mining stocks were offset by losses in financial sector.

The benchmark S&P/ASX200 index closed up 8.4 points, or 0.2%, to 4670.3 and the All Ordinaries rose 13.5 points, or 0.3%, to 4689.6.

On the economic front, the Reserve Bank of Australia sold a net $313 million in the foreign exchange market in November. This figure includes foreign exchange transactions against the Australian dollar undertaken by the RBA.

The central bank also bought a new $354 million worth of foreign currency from the government during the month. Altogether, the RBA bought a new $41 million worth of foreign exchange in November.

In New Zealand, benchmark index ended the day down in the negative terrain after inching up for two days in a row. The NZX50 decreased 0.32% or 10.14 points to 3122.92. The NZX 15 declined 0.53% or 30.27 points to close at 5671.04.

On the economic front, business confidence in New Zealand softened further in December – the third successive monthly decline. A net 39 percent expect better times ahead, down 4 percentage points on November’s reading. Confidence was down across all the major sub-groups. However, despite the slight fall in confidence, the glass remains half full, as per the report. The overall level of confidence remains robust, and noticeably so across all the major segments. Confidence is still strongest in the construction industry, but is now closely followed by retailing, services and manufacturing.

In South Korea, stocks closed lower as institutional investor’s unloaded large-cap shares on economic uncertainties. The benchmark Korea Composite Stock Price Index (KOSPI) slid 16.4 points to 1,647.84.

In Taiwan, stock market in Taiwan took the losses to third consecutive session, following the mixed closing on the Wall Street. Construction sector lead the losers while semiconductor sector put up some gains. The benchmark Taiex share index extended losses for the third session on Thursday, by finishing the day lower by 9.43 points or 0.12% at 7742.17.

In Philippines, stocks ended marginally higher today amid mixed cues from the Wall Street and ideas that the central bank will keep its interest rates steady later on today. The benchmark index PSEi ascended 0.52% or 15.78 points to 3,048.15, while the All Shares index mounted 0.40% or 7.76 points to 1,901.40.

In India, the key benchmark indices ended a choppy trading session lower as world stocks fell after the Federal Reserve at the end of a two-day policy meeting, detailed its plans to remove excess liquidity from the financial system, as previously planned. The BSE Sensex was down 18.52 points or 0.11% to 16894.25. The S&P CNX Nifty was down 0.30 points or 0.01% to 5041.75.

Elsewhere, Malaysia’s Kula Lumpur Composite index finished slightly lower at 1266.97 while stock markets in Indonesia’s Jakarta Composite index inched down 12.97 points ending the day lower at 2509.58.

In other regional market, European shares and the euro weakened on Thursday, as another downgrade for Greece's credit rating kept investors focused on prospects for the region. The U.K. FTSE 100 index declined 0.6% or 30.42 points to 5,290, the German DAX index lost 0.5% or 27.96 points to 5,875 and the French CAC-40 index slipped 0.5% or 18.80 points to 3,857.