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Asia-Pacific markets fall on concern over Europe debt crisis, Fed comment

Capital Market/ 15:45 , Dec 14, 2011

Risk off continues after US Fed failed to take any new steps to stimulate growth and the chilling effects of Europe unresolved debt crisis.

Asia-Pacific stock markets closed lower on Wednesday, as risk aversion selloff continued on disappointment at the lack of QE3 action from the Federal Reserve and growing pessimism over euro zone woes.

The Fed pledged to keep interest rate near zero at least through mid-2013, noting that although the US economy was improving moderately, the unemployment rate remained elevated and strains in the global financial market might threaten future growth.

Uncertainties over Europe remain on the dock as European leaders have yet to come up with any concrete proposals to resolve most imminent debt problems. Friday's agreements are all about forward-looking measures to support the nations' future fiscal health. Investors remained skeptical that, without further easing from the European Central Bank, the EU's new fiscal pact announced last Friday was adequate to resolve the region's debt crisis.

Sentiments was further hit by news report that German Chancellor Merkel's refused to expand the firepower of the permanent Eurozone bailout fund, the European Stability Mechanism. There have been discussions among European leaders on combing the temporary EFSF 440 billion euro with ESM 500 billion euro to ensure enough support in case of troubles in the bigger countries like Spain and Italy. However, Germany has been in strong opposition to raising the ESM beyond 500 billion euro level.

Back to countries, the Sydney benchmark All Ordinaries Index fell 0.04% at 4,249.80 after hovering in and out of the boundary line complete afternoon, as investors reluctant to take risky positions on lingering worries over the Eurozone debt crisis contagion and as US Federal Reserve didn't signal any further monetary easing following its policy meeting yesterday. Activity remained on the light side once again with only around A$4 billion worth of trades exchanging hands throughout the day.

In Japan, Nikkei Stock Average fell 0.39% at 8,519.13, as risk aversion selloff continued for second day in row, after the Fed kept its monetary policy steady, and did not announce new policy initiatives. Meanwhile rise in yen against the euro also triggered selloff activities. The benchmark index briefly fell below 8,500 for the first time in about two weeks. The major indexes spent most of the session languishing under break-even.

Mabuchi Motor Co dropped 2.9% to 3,400 yen after the automaker has revised down its consolidated results forecasts for the fiscal year ending December 31, 2011 on Tuesday. The Company lowered forecast for consolidated net sales for the fiscal year ending December 31, 2011, by 5.5% from our previous forecast, to 78,000 million yen. Taking into account of lower sales forecast, company accordingly revised down its forecasts for operating income to 2,700 million yen (a 22.9% reduction to our previous forecast) and ordinary income to 3.9 billion yen (a 22.0% reduction).

Online gaming firm Nexon Co made its Tokyo trading debut on Wednesday and its shares ended first session at 1,270 yen, down 2.3% from 1,300 yen IPO price. It had briefly fallen to 1,222 yen after opening at 1,307 yen following its $1.2 billion initial public offering.

In China, Shanghai Composite index declined 0.89% to 2,228.53, a lowest level not seen since Mar. 18, 2009, when index closed at 2,223.73, as continued selloff for fifth day in row amidst growing fears over a slowing domestic economy and tight cash conditions. Risk aversion took a front seat after Chinese leaders have vowed to maintain property market restrictions in 2012 to bring housing prices back down to a reasonable level.

The Central Economic Work Meeting, an annual gathering of Chinese leaders to decide economic policy for the next year, agreed to maintain a proactive fiscal policy and prudent monetary policy in 2012.

China faces the dual-pressure of an economic growth slowdown and rising inflation, officials at the three-day meeting agreed. China will strengthen the forward-looking nature of its macro economic policy to maintain relatively fast economic development rate and stable inflation. The country will also increase the number of middle-income citizens amid its economic development, the conference said.

Transaction turnover in the Chinese market shrank as lack of participation due to shrinking liquidity after central bank continued to withdraw liquidity from banks. The People's Bank of China issued 38 billion yuan one-year notes and conducted repurchases of 35 billion yuan yesterday, heading for a net-withdrawal for the third consecutive week. A total of 13 billion yuan notes are set to mature this week.

Reality stocks continued falling streak today. Investors avoided realty stocks after rating agency Fitch said in a latest report growth in China's homebuilding sector may slow even more next year as overall bank lending to real estate developers will remain tightly controlled and rules to curb home purchases are unlikely to be reversed. Shares in China Vanke fell 1% to 7.10 yuan, Poly Real Estate Group Co 2.1% to 9.38 yuan, and Gemdale Corp 0.9% to 4.45 yuan.

In Hong Kong, the Hang Seng index fell 0.5% to 18,354.43, a lowest level since Oct 30, 2011, as risk aversion selloff continued for fifth day in row, on uncertain outlook for the Chinese economy and disappointment over the U.S. Fed failure to announce any new stimulus steps. However the downside was limited after the HSI's 4.1% decline over the past four sessions.

Banks and financials stocks turned lower. HSBC Holdings declined 1.8% to HK$58.70. Resources firms were lower because of concerns about China's economic growth. Cnooc closed down 1.1% at HK$11.48 and China Shenhua slid 2.5% to HK$33.30. Utilities played ended higher after news of tariff hikes. Power Assets gained 1.6% to HK$57.60 and CLP Holdings 0.8% to HK$66.25.

In India, the Bombay Stock Exchange benchmark SENSEX finally closed 0.76% lower at 15,881.14 after moving between positive and negative zone entire day. Most metal shares declined as LMEX, as global commodity prices fell. Interest rate sensitive realty stocks fell after the latest data showed inflation in November rose more than market expectations.

Among other Asian bourses, the New Zealand NZX50 declined 0.26% to 3,284.15. Malaysia KLSE Composite fell 0.87% to 1,460.13, Singapore Strait Times index fell 0.5% to 2,672.39. Indonesia Jakarta Composite index was down 0.32% to 3,751.60. The South Korea KOSPI dropped 0.34% to 1,857.75. The Taiwan TAIEX index rose 0.38% at 6,922.57. Philippine PSEi added 0.08% to 4,285.93.

 



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