Asian Markets windup Wednesday lower

Liquidity fear drags Shanghai lower while Hang Seng, Nikkei, Sensex follows

Stock markets in Asian region extends losses on Wednesday, 20 January 2010, as selling gathered pace on reports that China had asked banks to stop lending for the rest of January. Fears over a bank lending halt in China overshadowed a strong lead overnight from Wall Street as Asian shares saw mixed trade, while worries over the European economy hit the euro.

On Wall Street, stock markets witnessed strong rally on Tuesday, thanks to the healthcare, technology, and material sectors, Strong earning reports managed to boost stocks. Though stocks made a shaky start at the start of the day, they gained momentum amid some major corporate news in the market. Stocks gained in the face of strong dollar.

At the end of the day, the Dow Jones Industrial Average ended higher by 115.78 points at 10,725.43. Nasdaq ended higher by 32.41 points at 2320.4. S&P 500 ended higher by 14.2 points at 1150.23. Earlier in the day, Dow opened the session higher by 42 points.

In the commodity market, crude oil dropped to its lowest this year in New York on speculation global stockpiles remain more than adequate and as a stronger dollar dampened hedging demand.

Crude oil for February delivery fell as much as 93 cents, or 1.2%, to $77.07 a barrel in electronic trading on the New York Mercantile Exchange, the lowest since 24 December 2009. It traded for $77.64 a barrel, 36 cents lower as of 1:32 p.m. London time.

Brent crude oil for March settlement fell as much as $1.28, or 1.7%, to $75.82 a barrel on the London-based ICE Futures Europe exchange. It traded for $76.29 as of 1:33 p.m. London time.

Gold dropped for the first time in three days in London as a stronger dollar eroded demand for the precious metal as a store of value. Gold for immediate delivery lost $6.38, or 0.6%, to $1,131.82 an ounce at 9:07 a.m. London time. Bullion for February delivery was 0.7% lower at $1,131.80 on the New York Mercantile Exchange’s Comex division.

In the currency market, the U.S. dollar held on to early gains against the euro but was about unchanged against the yen in late Asian trade, as risk aversion slammed the Euro and as concerns about China's efforts to curb lending further dragged sentiment.

The Japanese yen strengthened against greenback on Wednesday. Japan’s currency was quoted at 90.936 per US dollar on Wednesday from yesterday quote at Y91.14 per dollar in New York.

The Hong Kong dollar was trading at HK$ 7.7662 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 trades, the Australian dollar fell almost a cent on Wednesday as China took fresh action to dampen bank lending there, while a slide in the Euro gave a boost to the US dollar. At the local close, the dollar was trading at $US0.9163, down from $US0.9247 late in New York and under chart support at $US0.9170.

In Wellington trades, the New Zealand dollar plunged more than a US cent today after the Consumer Price Index (CPI) for the December quarter was lower than expected and after China was reported to be constraining bank lending. The NZ dollar fell from around US74c to US73.50c after the CPI was reported to have fallen 0.2% in the December quarter to put the annual rate at 2%. The NZ dollar was US72.95c at 5pm from US73.91c at 8 am, and US83.84c at 5pm yesterday.

The South Korean won closed at 1138.20 won to the greenback, down from Tuesday 1127.50 won.

The Taiwan dollar weakened against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 31.8360, 0.0360 down from Tuesday's close of NT$31.8000.

In equities, most Asian markets ended lower, as concerns China may step up its tightening measures to cool a rapidly growing economy hit banking and resource shares hard. Several other regional markets also reversed direction or pared early gains made after a strong finish on Wall Street, after the Chinese banking regulator said the nation's banks were expected to make fewer loans this year than in 2009.

In Japan, the share market gave up steam in afternoon trade to extended losing streak for third consecutive day, after reports that Chinese regulators have urged some of its nation’s banks to limit lending spooked investors and wariness ahead of U.S. and Japanese corporate earnings reports.

At the closing bell, the Nikkei 225 Stock Average index was at 10,737.52, dropped 27.38 points or 0.25%, while the broader Topix of all First Section issues on the Tokyo Stock Exchange fell 5.04 points, or 0.53%, to 944.72.

In Mainland China, the stock market dived first time in five trading days after reports that some Chinese banks have been ordered to curb lending spooked local investors, pushing benchmark Shanghai index to 2.9% lower on broad based selling across the sectors. Market players securing gains on speculation Beijing will withdraw stimulus measures to prevent the nation from overheating.

Financials shares tanked after Chinese banking authorities order some banks to stop all lending, including short-term bills, for the rest of the month. Materials and resources and energy stocks dived on renewed concerns over tighter controls on lending growth. Trading firms surrendered yesterday rally after Shanghai denied the rumor that it allow individual overseas investment plan.

Premier Wen Jiabao also indicated "relatively loose monetary policy" in a speech yesterday, hinting at a possible exit of the stimulus measures. He added that China would manage the pace of extending loans to prevent financial risks.

At the end of trade, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, stumbled 95.02 points, or 2.93%, to 3,151.85, while the Shenzhen Component Index on the smaller Shenzhen Stock Exchange has lost 434.52 points, or 3.25%, to 12,916.15. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, dropped 3.19%, to 3,395.44

In Hong Kong, the benchmark index dropped on broad based sell off across the sector after Chinese banks were urged to contain lending to tackle bad loans. According to reports, some Chinese banks have been told to stop all lending for the remainder of the month after a burst of credit in the first couple of weeks. Financials and properties tanked after Chinese banking authorities order some banks to stop all lending, including short-term bills, for the rest of the month. Materials and resources dived after lower commodities prices on renewed concerns over tighter controls on lending growth. Energy stocks dived amid expectations of a dismal US crude inventory report.

At the end of session, the Hang Seng Index retracted 391.81 points, or 1.81%, to 21,286.17, while the Hang Seng China Enterprise, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, melted 318.67 points, or 2.53%, to 12,282.09.

In Australia, the share market eroded most of morning gains to finish the session slightly above the gains line, on reports that Chinese regulators told some of the nation’s banks to limit lending and the China signaled it will rein in stimulus measures. At the closing bell, the benchmark S&P/ASX200 index was up 7.0 points, or 0.14%, to 4,868.20, meanwhile the broader All Ordinaries added 5.50 points, or 0.11%, to 4,895.10.

On the economy front, the Westpac-Melbourne Institute index of consumer sentiment increased by 5.6% to 120.1 points in January, from 113.8 in December. The increase reverses declines in both November and December and is now 33% higher than a year ago.

In New Zealand, equities continue to hover in the negative terrain, registering a flat end after declining by almost 20 points yesterday. Strong gains in the United States and European stock markets appeared to make little early impression on the New Zealand share market which managed to just edge ahead in the first few minutes after opening.

At the closing today, the NZX 50 edged down 0.01% or 0.34 points to 3227.25. Meanwhile, the NZX 15 lost 0.14% or 7.9 points to close at 5820.47, losing for the eighth day in a row.

On the economic front, lower food prices in New Zealand helped drive the Consumers Price Index (CPI) down 0.2% in the December quarter. The quarterly decrease, which was also a result of weaker price increases for goods and services, contributed to an annual CPI increase of 2%. Food prices were 2.4% lower during the quarter, lead down by vegetable prices, which decreased by 17.6%, significantly lower than their winter price peaks. Meat, poultry, fish and groceries were also down.

In South Korea, stocks finished higher as investors stepped up bargain hunting. The benchmark Korea Composite Stock Price Index (KOSPI) climbed 4.16 points to end at 1,714.38, erasing losses in the previous session.

On the economic front, South Korea’s trade surplus touched an all-time high of US$40.4 billion last year thanks to a soft local currency and low oil prices. Exports fell 13.9% in 2009 from a year ago to $363.5 billion won, and imports slipped 25.8% to $323.1 billion.

In Singapore, fears over a bank lending halt in China and European economy weighed down the Singapore share lower, despite a strong lead from Wall Street overnight. Banks and properties were lower on concerns over possibly more credit tightening in China and wariness ahead of US and Singapore corporate earnings reports, while worries about Chinese lending squeeze and European economy taking toll on manufacturing and multi-industries shares. At the closing bell, the blue chip Straits Times Index was at 2,893.13, slipped 19.79 points or 0.68%.

In Taiwan, stock market in Taiwan extended losses for the third session on Wednesday, 20 January 2010, dragged by tech heavyweights such as Acer on concerns that the stocks had been overbought after recent gains fuelled by hopes of growing tech demand. The benchmark Taiex share index extended loses to third session, as the index finished day lower by 28.07 points or 0.34% at 8220.93.

On the economic front, following the effort to mop up excessive supply of credit in the market, the Central Bank of Republic of China (Taiwan) has started to jack up market interest rates, a reflection of its gradual shift to a tighter monetary policy.

On Tuesday, the Central Bank of Republic of China absorbed interbank overnight call loans at 0.12% interest rate, via major banks, inducing the average rate for such loans in the market to go up to 0.118%, a nine-month high, up 0.008 of a percentage point. Thanks to the active involvement of the CBC, the outstanding amount of call loans has expanded to NT$250-350 billion, from NT$150 billion previously, with the rate having bounced back from the nadir of 0.095% to 0.118%.

In Philippines, the stock market closed flat, with the market struggling to hold higher as investors remained cautious despite a positive close on Wall Street overnight. The benchmark index PSEi lost 0.02% or 0.71 points to 3,083.86, while the All Shares index tumbled 0.08% or 1.61 points to 1,930.62.

In India, key benchmark indices ended a choppy trading session lower as weak global stocks weighed on investor sentiment. Realty, health care, PSU, FMCG, oil exploration and PSU OMCs stocks fell. But metal stocks rose. The market breadth was weak. The BSE 30-share Sensex was down 11.57 points or 0.07% to 17,474.49. The S&P CNX Nifty was down 3.95 points or 0.08% to 5221.70.

Elsewhere, Malaysia’s Kula Lumpur Composite index finished slightly higher at 1306.62 while stock markets in Indonesia’s Jakarta Composite index inched up by 1.20 points ending the day higher at 2667.27.

In other regional market, European shares weakened in early trading on Wednesday, with negative broker comment weighing on the auto sector and banks lower as investors brace for more results from major U.S. lenders. The German DAX index lost 0.45% or 26.63 points to 5,950, the French CAC-40 index declined 0.44% or 17.67 points to 3992 and the U.K. FTSE 100 index slipped 0.57% or 31.60 points to 5,482