Investors were concerned that the People's Bank of China would tighten its monetary policy, as house prices rose the most in nearly 3 years in September. The 7-day repo contract, usually watched as an indicator of liquidity stress, traded, having dipped steadily since October 9, soared to 4.82% on Thursday, up from 4.55% in the previous day.
The market also worried about the financial health of Chinese lenders after Industrial & Commercial Bank of China and its four main rivals reportedly wrote off 22.1 billion yuan of bad debts in the first 6 months of the year, compared to 7.65 billion yuan the same period last year.
However, most of the regional bourses recouped losses late afternoon, as sentiment were lifted by better than expected China's manufacturing data. The preliminary HSBC China Manufacturing Purchasing Managers' Index stood at 50.9 in October, up from September's final reading of 50.2. The figure provided a sense of relief as it came in above 50, which separates economic expansion from contraction, the brokers said. The market drew support from the China data as it beat the market expectation of 50.4" and hit a seven-month high.
Among Asian bourses, Tokyo stocks recouped losses late afternoon to end higher, as sentiment was lifted by a weaker yen and strong Chinese manufacturing data. The 225-issue Nikkei Stock Average closed up 60.36 points, or 0.42%, from Wednesday at 14,486.41, after falling as low as 14,273.71. Gainers were led by construction, communication and paper issues, while decliners included utilities, real estate and consumer finance firms.
Hitachi rose 8.39% to 659 yen after the company more than doubled its net profit outlook for the fiscal half-year ended Sept. 30, due to strength in areas such as electric-power systems
Panasonic was up 1.5% to 936 yen following news reports that the company is planning to cut up to 50% of its workforce in its semiconductor business by fiscal 2014 in an effort to improve earnings.
Tokyo Electron shares declined 2% to 5450 yen on reports the semiconductor company likely will post a 3 billion yen operating loss in the six-month period that ended in September. This was less than half the amount forecast.
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In Australia, Australian financial market finished higher, with shares of top lenders leading the way on optimism ahead of the release of ANZ and National Australia Bank's full year results next week. The benchmark S&P/ASX200 advanced 16.80 points, or 0.31%, to 5372.90, while the broader All Ordinaries increased 16.90 points, or 0.32%, to 5373.70.
Australian banking and financial stocks finished stronger, with Australia & New Zealand Banking Group rising 1.3% to A$32.37, Westpac Banking Corp 0.9% to A$34.18, Commonwealth Bank 1.3% to A$75.58 and National Australia Bank 0.3% to A$35.59.
Materials and resources blue chips closed mixed in Sydney on profit booking as commodity prices dipped and China's top lenders reportedly wrote off about $3.7 billion in bad debt for the first six months of 2013, leading to a spike in Chinese interbank lending rates. Among miners, BHP Billiton dropped 0.4% to A$37.35, while Rio Tinto added 0.3% to A$63.85. Fortescue Metals Group was down 0.9% to A$5.30.
Wesfarmers lost 0.2% to A$41.92 even though its Coles supermarket chain and liquor stores sold A$6.9 million worth of goods during the September quarter, an increase of more than 4%.
Toll Holdings (TOL) ended 2.8% firmer following its AGM today. Integrated logistics provider said it expects underlying earnings this financial year to improve on 2012. Productivity and cost reductions were flagged as two drivers.
In China, Chinese shares declined for third consecutive day, weighing the benchmark Shanghai Composite index lower by 0.86% to 2164.32, on liquidity woes after money-market rates increased above liquidity indicator.
Selloff in the Mainland China market rekindled tighter liquidity worries in the China's banks after a sharp jump in the money market rate after a reports China's top lenders wrote off about $3.7 billion in bad debt for the first six months of 2013 and as policy makers drained cash from the financial system amid signs of a pick-up in the economy.
The seven-day repurchase rate, a gauge of funding availability in the Chinese banking system, traded at a weighted average of 4.820% by late afternoon, compared with yesterday's average of 4.05%.
Money rates jumped after the People's Bank of China refrained from conducting reverse repos for a third straight auction. The PBOC drained a net 58 billion yuan ($9.8 billion) from the financial system this week as reverse repos matured. PBOC withdrew 44.5 billion yuan last week.
Higher money rates are raising concern policy makers may be tightening liquidity to curb credit growth. The pressure for monetary and credit expansion is still large as the trade surplus widens and capital flows in, the central bank said in an October 16 statement. There is ample liquidity in the banking system and the central bank will follow a prudent monetary policy, according to the statement.
In Hong Kong, HK financial market declined, with lenders and developers led downtrend on fears of a liquidity crunch in Mainland banks after China's interbank lending rate moved higher for a second day and concerns that Beijing could step in tightening measures to cool down the property market.
The benchmark Hang Seng Index declined 164.13 points, or 0.71%, to 22835.82, while the Hang Seng China Enterprises Index dropped 135.20 points, or 1.29%, to 10322.12.
Chinese banks and developers recorded substantial losses in Hong Kong on fears of a liquidity crunch after China's interbank lending rate moved higher for a second day. In addition, data showing a further rise in house prices earlier in the week increased concerns that Beijing could step in to cool down the market. Among lenders, China Construction Bank dropped 1.87% to HK$5.76 and Industrial & Commercial Bank of China sank 1.33% to HK$5.21. Among developers, China Overseas Land dropped 2.1% to HK$23.15 and China Resource Land dropped 2.1% to HK$21.35.
In India, Volatility continued in late trade as the key benchmark indices cut losses after sinking in the negative zone from positive zone to hit fresh intraday low. The barometer index, the S&P BSE Sensex, was provisionally down 60.51 points or 0.29%, up 50.67 points from the day's low and off 332.05 points from the day's high. The Sensex provisionally settled well below the psychological 21,000 level, having alternately moved above and below that mark in intraday trade.
GAIL (India) rose 1.59%. The company announced after market hours on Wednesday, 23 October 2013, that in a landmark development to expand the natural gas footprint in eastern India, GAIL (India) has signed a Gas Cooperation Agreement (GCA) for natural gas infrastructure and city gas distribution with the Department of Industries, Government of Bihar. Under the provisions of the GCA, GAIL and the Bihar Government will evaluate the feasibility for cooperation for the development of the use of eco-friendly fuel, especially natural gas, in the state as well as development of natural gas distribution and city gas infrastructure in identified urban areas and cities after obtaining due authorization from the Petroleum and Natural Gas Regulatory Board (PNGRB).
NHPC slumped 5.36%. The company during market hours today, 24 October 2013 said its board of directors at meeting held today, 24 October 2013, has unanimously approved the buy-back of upto 10% of fully paid up equity shares at Rs 19.25 per share payable in cash for an aggregate amount of Rs 2367.89 crore through tender offer.
Wipro lost 4.41%, with the stock extending Wednesday's 4.41% fall triggered by the company's dollar revenue growth from IT services in Q2 September 2013 lagging that of its peer companies. Wipro announced the result after market hours on Tuesday, 22 October 2013. Wipro reported 28% growth in consolidated net profit from continuing operations to Rs 1932 crore on 19% growth in revenue from continuing operations at Rs 10992 crore in Q2 September 2013 over Q2 September 2012. The results are as per International Financial Reporting Standards. Wipro said non-GAAP adjusted net profit from continuing operations jumped 29% to Rs 1932 crore in Q2 September 2013 over Q2 September 2012.
Elsewhere in the region, New Zealand's NZX 50 index fell 0.85%. Indonesia's Jakarta Composite index added 1.06%. South Korea's KOSPI rose 0.54%. Taiwan's Taiex index added 0.24%. Malaysia's KLSE Composite added 0.27%. Singapore's Straits Times index increased 0.41%.
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