Wednesday woes continues to whack Asian Markets

Shanghai slumps on interest rate decision as Sydney, Seoul, NZX 50, Nikkei follows

Stock markets in Asian region witnessed a weighted Wednesday on 13 January 2010, amid renewed concerns over a global economic recovery following the Chinese central bank's move to tighten monetary conditions. The overnight fall on Wall Street, lower commodity prices and profit taking after recent gains are also contributing to the weakness.

On Wall Street, stocks closed lower as weakness in the chip, energy and material sectors followed an earnings miss by Alcoa the day before. The Dow Jones Industrial Average fell 37 points, or 0.3%, at 10,627. The S&P 500 sank by 11 points, or 0.9%, at 1136 and the Nasdaq fell off by 30 points, or 1.3%, at 2282.

In the commodity market, crude oil declined for a third a day after China raised bank reserve requirements to curb a credit boom and prevent the economy from overheating, and as an industry report showed an increase in U.S. crude and distillate stockpiles.

Crude oil for February delivery dropped as much as $1.01, or 1.3%, to $79.78 a barrel in electronic trading on the New York Mercantile Exchange. It was at $79.89 at 11:48 a.m. Singapore time. Yesterday, the contract fell $1.73 to settle at $80.79, the biggest one-day decline since 9 December 2009.

Brent crude for February settlement fell as much as 88 cents, or 1.1%, to $78.42 a barrel on the London-based ICE Futures Europe exchange. It was at $78.50 a barrel at 11:49 a.m. in Singapore. Yesterday it dropped $1.67, or 2.1%, to $79.30 a barrel, declining for a fourth day.

Gold, little changed in Asia, may extend its biggest fall in more than three weeks, on speculation that demand for commodities will ease after China took action to cool bank lending. Gold for immediate delivery weakened as much as 0.3% to $1,125.63 an ounce and was at $1,128.90 at 10:26 a.m. in Singapore after rising as much as 0.4% earlier.

In the currency market, the US dollar remain in range, even though Asian stocks are broadly lower in response to China’s measure to curb lending, including hiking bill yields and raising reserve requirements.

The Japanese yen strengthened against major currencies in Asian trade on Wednesday on speculation global economic recovery will slow, spurring demand for Japan’s currency as a refuge. Meanwhile the yen slightly softened in afternoon trading against US dollar after Federal Reserve Bank of Philadelphia President Charles Plosser said policy makers must raise rates before unemployment falls to an acceptable level. Japan’s currency was quoted at 91.19 per US dollar on Wednesday from yesterday quote at Y90.98 per dollar in New York.

The Hong Kong dollar was trading at HK$ 7.7552 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 lower on Wednesday as financial markets offloaded commodity-driven currencies after China’s tightening of monetary policy to cool the nation’s economy. At the local close, the dollar was trading at $US0.9227, down 0.7%from Tuesday’s close of $US0.9289.

In Wellington trade, the New Zealand dollar traded in a range below recent highs today as investors started to shun currencies in this part of the world again but it gained against the Australian dollar. The NZ dollar was US74.04c at 5pm, having traded between US73.74c and US74.14c during the session. It was at US73.99c at 5pm yesterday.

The South Korean won closed at 1,125.50 won to the greenback, down from yesterday 1,123.60 won.

The Taiwan dollar weakened against the greenback. The Taiwan dollar was trading lower against the US dollar at NT$ 31.8090, 0.0190 down from Tuesday’s close of NT$31.7900.

In equities, Asian stock markets edged lower, weighed by Wall Street’s decline and the Chinese central bank's move to rein in excessive credit creation.

In Japan, the share market tumbled from 15-month highs yesterday, on tracking weak cues from offshore market. Investors consolidated gains following Wall Street’s overnight decline as disappointing earnings results and the Chinese central bank’s move toward tighter policy on Tuesday.

At the end of today’s trade, the Nikkei 225 Stock Average index was at 10,781.92, surrendered 144.11 points or 1.32%, while the broader Topix of all First Section issues on the Tokyo Stock Exchange dropped 10.11 points, or 1.06%, to 944.02.

On the economy front, the cabinet office said that the economic watcher index, a survey of barbers, taxi drivers and others who deal with consumers, climbed to 35.4 from 33.9 in November.

In Mainland China, the stock market nosedived with broad based sell off across the major heavyweights after China moved to cool lending and commodity prices dropped on fading enthusiasm about the economic recovery following the Chinese central bank’s credit-tightening measures.

At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, stumbled 3.09% or 101.31 points, to 3,172.66, while the Shenzhen Component Index on the smaller Shenzhen Stock Exchange surrendered 2.73% to 13,016.56. The CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, sank 3.22%, to 3,421.17.

On the economic front, the People's Bank of China yesterday raised the reserve requirement ratio by 0.5% on Yuan deposits starting next Monday. The increase is the first rise since 25 December 2008. The reserve-requirement increase will help to drain 200 billion Yuan (US$29.29 billion) to 300 billion Yuan from the market

The PBOC also raised the returns on its 20-billion-yuan central bank one-year bills by a bigger-than-expected 0.08 percentage point to 1.8434%. It was the first increase in this area since last August. The central bank has also drained a record 200 billion Yuan via a 28-day bond-repurchase agreement.

Last week, the central bank conducted a net drain of 137 billion Yuan from the market, the biggest weekly net drain since late October, after draining a net 6 billion Yuan the week before that.

In Hong Kong, the share market logged worst one-day percentage loss in more than a month, weighed by weak offshore leads and falls in commodity prices. China's central bank’s tightening monetary policy to address concerns the economy added to the negative tone.

At the closing bell, the Hang Seng Index tumbled 578.04 points, or 2.59%, to 21,748.60, while the Hang Seng China Enterprise, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, dropped 485.19 points, or 3.74%, to 12,482.18.

In Australia, the shares market tumbled after a weaker offshore cues and sharply pullback in commodity metal and oil prices in Asian deal. Mining and energy stocks once again the biggest drag on the markets on pullback in metal and oil prices in the wake of the China move to tighten monetary policy spurred worries global economic recovery momentum may dampen. Banking stocks mostly weaker on tracking US peers.

At the closing bell, the benchmark S&P/ASX200 index tumbled 31.40 points, or 0.64%, to 4,868.10, meanwhile the broader All Ordinaries retracted 31.50 points, or 0.64%, to 4,900.10.

On the economic front, the Australian Bureau of Statistics said Australia’s GDP grew 0.2%, seasonally adjusted, in the September quarter. Non-farm GDP grew 0.1%. The Terms of trade rose 1% and real gross domestic income rose 0.4%.

In New Zealand, equities declined for the third day in a row, dipping down by almost 14 points at closing. Share markets fell following a slide by equity markets around the world after China said it would raise banks' reserve requirements in a move that could dampen a nascent recovery from the worst global recession in decades. The benchmark NZX 50 decreased 14.09 points or 0.43% to 3276.2. The NZX 15 lost 23.26 points or 0.39% to close at 5962.28.

In South Korea, shares finished lower as a faster-than-expected decision by China to cool bank lending triggered foreign and institutional sell-offs. The Korea Composite Stock Price Index (KOSPI) sank 27.23 points to 1,671.41.

In Singapore, the share market sank after a lead from Wall Street overnight and other Asian bourses were fairly weak; thanks to significant declines in commodity prices and China surprise measure to hike in reserve requirement. The blue chip Straits Times Index finished the day at 2,888.38, dropped 27.73 points or 0.95%.

In Taiwan, stock markets in Taiwan tumbled further led by losses in financial and other stocks that have investments on the Mainland China, weighed by news of further Chinese monetary tightening. China took its strongest step towards tightening monetary policy on yesterday as the world's third-largest economy roars ahead, surprising investors with an increase in banks' required reserves that rocked global financial markets.

The benchmark Taiex share index extended losses for second straight session, by finishing the day lower by 112.81 points or 1.36% at 8196.56, posting biggest single day fall since 10 December 2009 when market corrected 119.51 points.

On the economic front, the annual growth of Taiwan’s consumer price index (CPI) posted negative 0.21% in December 2009, for the 11th consecutive monthly drop; and the average rise for the full year was minus 0.87%, the largest fall of its kind ever, thanks to the economic downturn.

According to the Cabinet-level Directorate General of Budget, Accounting & Statistics (DGBAS) the fall in CPI mainly attributed to price drops in vegetable and fruits and the lower prices and charges levied by schools, restaurants, and entertainment providers trying to attract budget-conscious consumers.

In Philippines, the stock market closed marginally lower in line with the other Asian equities sidelining the positive news on economic frontal. All FDI components posted net inflows, reflecting favorable investor sentiment on the country’s underlying macroeconomic fundamentals. Moreover, export growth rose for the first time in 14 months, indicating that demand is slowly recovering after the global downturn.

The composite index took cues from the losses on Wall Street overnight, which slipped Tuesday after disappointing quarterly results from Alcoa to kick off the corporate earnings season injected some caution in the market. The benchmark index PSEi declined 0.28% or 8.92 points to 3,096.70, while the All Shares index tumbled 0.30% or 6.01 points to 1,943.11.

In India, the key benchmark indices turned positive, recovering sharply from the negative zone, thanks to positive opening by European stocks. The BSE 30-share Sensex was up 87.29 points or 0.50% at 17,509.80. The S&P CNX Nifty closed up 23.55 points or 0.45% at 5233.95.

Elsewhere, Malaysia’s Kula Lumpur Composite index finished slightly lower at 1289.51 while stock markets in Indonesia’s Jakarta Composite index declined by 26.68 points ending the day lower at 2632.87.

In other regional market, European shares edged higher on Wednesday, as gains for miners offset weakness in the banking sector after French bank Societe Generale took another hefty write-down on its mortgage assets. Overall, the German DAX index rose 0.2% to 5,954, the French CAC-40 index traded flat at 3,998.40, while the U.K. FTSE 100 index declined 0.3% to 5,484.