Asia-Pacific market dips on Portugal downgrades, ahead of US Jobs report

Asia-Pacific market ended lower in subdued trade on Wednesday, July 06, 2011, as investors booked some profit amid mixed cues from offshore market, coupled with worries about the health of the euro-zone economy, possible Chinese interest-rate increase, and ahead of Friday's US jobs report.

Investors sold riskier assets as a result of Portugal's rating downgrade, negative economic reports from Europe and concern about Mainland Chinese banks' exposure to local government debts.



Fresh fears over Europe's debt problems revived after Moody's cut Portugal's credit standing to junk and warned of the country may well need a second round of rescue funds. Portugal's long-term government bond ratings were cut to Ba2, or junk, from Baa1 by Moody's, making it the second Euro region country with a non-investment- grade ranking. Portugal was the third country, after Greece and Ireland, to have received emergency financing, securing a EUR78 billion loan from the European Union and the International Monetary Fund in May this year.

In addition, eurozone economic reports, including retail sales and PMI services, were disappointing, raising concern about the region's economic outlook. The volume of retail sales in both the euro area (EA17) and the EU27 fell by 1.1% in May from April. A separate report showed that private-sector activity in the 17-nation bloc in June expanded at its slowest pace since October 2009.

Meanwhile, Moody's issued a statement to say that the Mainland's local government debt, estimated by the country's state auditor to be 10.7 trillion yuan, might be understated by 3.5 trillion yuan. The rating agency warned that the mountain of debt was a major risk to the country's banking sector.

China's benchmark Shanghai Composite index closed 0.2% lower at 2,810.48 after falling as much as 2,780.73 during the trade, as investors took out riskier position amid fear of interest rate hike, coupled with worries over local government debt burden and health of the euro-zone economy. Banks and financials and realty stocks were major drag, suffered by profit taking on concerns over banks bad debts as well as slowdown in loan growth.

Hong Kong's benchmark index Hang Seng slid 1% at 22,517 on slew of bad news. Moody's downgraded Portugal's rating, while the World Trade Organisation ruled against China on raw materials dispute with its Western trading partners.

Japan's benchmark the Nikkei Stock Average closing the day up 110.02 points, or 1.10%, at 10,082.48, registered seventh day of winning streak to reach highest level since the 10,254 logged on March 11, the day the Great East Japan Earthquake struck, on optimism over Japan's corporate outlook.

The Australian benchmark All Ordinaries earned 0.14% before finishing at 4,663.60, despite hovered below equatorial line till noon, as gains in materials and resources and realty stocks that helped to overshadow losses in energy, healthcare, and retailer stocks.

New Zealand's NZX 50 Index fell 12.76 points, or 0.4% to finish at 3,460.82, down for the second consecutive day, on tracking a tepid performance on Wall Street which returned Tuesday from a long weekend.

Thailand benchmark SET index as trading 1.2% down at late afternoon as investors opted cash out some profit after the strong rally on election euphoria.

India's BSE benchmark SENSEX was trading nearly 0.1% lower at late afternoon after fluctuating in narrow range, as cautious investors unwilling to take major position ahead of upcoming quarterly results.

Among other Asian bourses, the key benchmark indices in Indonesia and Singapore fell 0.4% and 0.48%, respectively, while in South Korea and Taiwan up 0.44% and 0.46%, respectively.