Headline equities of the Asia Pacific market extended losses on Wednesday, 06 January 2016, as risk aversion sentiments gripped on persistent concerns surrounding China's economy, and renewed geopolitical tensions, this time on the Korean peninsula.
Regional stocks commenced today's trade with back foot, despite the firmer close of the Dow overnight, as investors were spooked after weak Chinese economic data fanned fears of a global slowdown. A private survey showed activity in China's services sector expanded at its slowest rate in 17 months in December, a further indication that the world's second-largest economy may be losing steam. The reading in a Caixin Media and Markit Economics survey of services-purchasing managers fell to 50.2 in December, down from 51.2 a month earlier. Meanwhile, released earlier this week, the Caixin PMI manufacturing dropped to 48.2 and stayed below 50 for the 10 straight month.
Fresh geopolitical concerns over the Korean Peninsula also weighed on sentiment in Asian markets after an announcement from North Korea that it had successfully conducted a hydrogen-bomb test.
In commodities, crude oil prices struggled near 11-year lows and added to the risk-off mood, with the market giving more attention to the stronger dollar and swelling U.S. inventories rather than growing tensions between Saudi Arabia and Iran. Relations between the two major oil producers collapsed in acrimony this week after Saudi Arabia's executed a Shi'ite cleric, setting off a storm of protests in Tehran. Brent crude inched up 0.3% to $36.51 a barrel, still in reach of the 11-year trough of $35.98 hit late last month.
Looking ahead, the spotlight is on minutes from December's FOMC meeting. At issue is the disparity between the Fed's 2016 policy outlook and that of the markets.
Among Asian bourses
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Australia Market skids on China growth woes
Australian share market declined for third consecutive session, as anxiety over global growth after weaker than expected manufacturing data globally and renewed geopolitical risk stemming from Iran-Saudi tensions and North Korea nuclear test. Barring utilities, all sectors traded in the red with energy, materials, and financials leading declines. At the close, the benchmark S&P/ASX 200 index tumbled 61.30 points, or 1.18%, down at 5123.10 points, while the broader All Ordinaries index lost 61.20 points, or 1.17%, to 5178 points. The S&P/ASX 200 VIX, which measures the implied volatility of S&P/ASX 200 options, rose 1.4% at 19.20, suggesting 5.4% swing in the equity benchmark index in the next 30 days.
Shares of material and energy sectors lost further ground today, after commodity prices fell, with the London Metal Exchange index, representing a basket of six primary metals, fell by 2.2% on the first day of trading this year, while iron ore prices shedding nearly 3% to snap an 11-day winning streak, amid fears of a global slowdown. Among major miners, BHP Billiton shed 2.5% to A$17.15, Rio Tinto dropped 3% to A$42.75, and iron ore miner Fortescue Metals sank 6.1% to A$1.78. Energy shares skidded, too, with Woodside Petroleum down 1.3% to A$28.39, Santos down 6.2% to A$3.51, and Origin Energy down 2.5% to A$4.71.
Shares of Incitec Pivot, a fertilizer company, closed 3.9% lower after the company said a freight train derailment in Queensland, Australia, right after Christmas, will wipe $14 million from its full-year net profit. Reports added the train was carrying more than 800,000 liters of sulfuric acid to one of its manufacturing plants.
JB Hi-Fi shares finished 2.3% higher at A$21.03, as shareholders bet that the retailer has had a strong Christmas period and can profit from Dick Smith's failure.
Nikkei sinks 1%
Japan share market finished down for third straight session, as risk sentiments weighed down by stronger yen against major currencies, persistent concerns surrounding China's economy, and renewed geopolitical tensions, this time on the Korean peninsula. Total 30 out of 33 TOPIX sectors recorded losses, with Oil & Coal Products, Mining, Nonferrous Metals, Iron & Steel, and Electric Appliances issues being major losers. The 225-issue Nikkei Stock Average declined 182.68 points, or 0.99%, to 18191.32. The Topix index of all Tokyo Stock Exchange First Section issues lost 15.87 points, or 1.05%, to 1488.84.
Shares of export-related companies fell further after yen appreciated to mid-118 level against the dollar. A stronger yen can pressure exporters' earnings when they are translated back into the Japanese currency. Soy sauce maker Kikkoman Corp, which gets 47% of revenue from North America, dropped 0.3%. Subaru automaker Fuji Heavy Industries, which relies on North America for 60% of sales, lost 2.9%. Fanuc Corp dipped 2.6%, Daikin Industries declined 2.5%, and TDK Corp shed 4%. Panasonic Corp shares fell 1.5%, while Toyota Motor Corp dropped 25%, Nissan Motor Co slipped 2.5% and Mazda Motor Corp. was 3.4% lower.
Shares of Japanese companies that rely on China for a large part of their businesses declined, after latest worrying news on China came in a private survey which showed activity in China's services sector expanded at its slowest rate in 17 months in December, a further indication that the world's second-largest economy has lost momentum.. Air-conditioner maker Daikin Industries, which gets a fifth of sales from China, lost 2.5%. Rohm Co., an electronic components maker that relies on the country for a third of its revenue, sank 4%. Rohm counts Apple as one of its biggest customers.
Shares of Apple Inc. suppliers tumbled on a report it may cut production of its latest iPhone model by nearly a third. Japan Display Inc. lost 3.5%, while Alps Electric Co. sank 3.2%. Sharp Corp. slumped 3.3%.
China Market rebounds on bargain buying
The Mainland China stock market rebounded, spurred by bottom fishing following steep losses in previous two sessions. The bargain buying spurred by the China's central bank injection of 130 billion yuan in cheap loans in a bid to stabilise the nation's rocky financial system and an extension of a selling ban for major investors and of direct intervention by state-controlled funds to prop up the market. The indexes were up despite data released after the market opened showing that growth in China's services sector slowed to its weakest in 17 months in December, which came two days after figures showing factory activity shrank for a 10th straight month. All sectors rebounded, with resources and energy surging more than 5%. The Shanghai Composite Index rebounded 2.25%, or 74.13 points, to close at 3361.84. The Shenzhen Composite Index, which tracks stocks on China's second exchange, surged 2.61%, or 54.18 points, to close at 2133.96. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, gained 2.14%, or 51.64 points, to close at 2468.37.
The selling ban on major shareholders was set to expire at the beginning of next week, but after markets crashed 7% on Monday, the China Securities Regulatory Commission (CSRC) said it will remain in place until new rules to manage the process are promulgated. Chinese stock market regulators have also signalled that they are considering adjusting so-called 'circuit breakers' that halt trading when there are steep falls on the share market. The market was also helped by statements from at least 30 companies saying their controlling shareholders or senior executives would not sell shares on the secondary market within the next six or 12 months.
Shares of energy and materials companies surged the most among industry groups on the CSI 300 Index. China Shenhua Energy Co, the nation's largest coal producer, and China Coal Energy Co. both surged 9.9%. Datong Coal Industry Co. and Shaanxi Coal Industry Co. jumped by the 10% daily limit as Premier Li Keqiang pledged to tackle overcapacity in the industry.
Hong Kong Market endures losses
The Hong Kong stock market endured another day of losses, as a reported nuclear test by North Korea heightened geopolitical concerns for investors already fretting over the slowdown in China. The benchmark Hang Seng Index declined 207.91 points, or 0.98%, to 20980.81 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, dropped 85.22 points, or 0.92%, to 9137.79 points. Turnover increased slightly to HK$75.2 billion from HK$72.4 billion on Tuesday.
Shares Hong Kong-listed China Vanke, one of China's largest real estate developer, resumed trade, with shares falling 9.2% to HK$20.80. The company has been fighting a suspected hostile takeover by one of its largest shareholders. The shares had been suspended from trade since December 18.
New World (00017) relaunched its privatization proposal for New World China Land (00917) at hefty premium. New World dipped 4.4% to HK$7.32, while New World China Land soared 21% to HK$7.49.
Shares of coal miners and steel makers escalated after China's premier Li Keqiang inspected coal mine and steel industries in Shanxi province the other day and urged the relevant officials to figure out measures of coal market regulation and lower cost of enterprises. China Shenhua (01088) jumped 4.2% to HK$11.82. Yanzhou Coal (01171) surged 6.7% to HK$3.64. Asia Coal (00835) gained 2.7% to HK$0.109. Steel counters also got the boost from the premier's visit. Angang Steel (00347) leaped 7.5% to HK$3.3. Maanshan Iron (00323) shot up 5% to HK$1.69. Chongqing Iron (01053) advanced 5.3% to HK$1.2.
Sensex edges lower
Metal stocks and index heavyweights ITC and L&T led losses for key benchmark indices. The barometer index, the S&P BSE Sensex, fell 196.19 points or 0.77% at 25,384.15, while the Nifty fell 47.95 points or 0.62% at 7,736.70, as per the provisional closing data.
Mahindra & Mahindra (M&M) fell 2.04% at Rs 1,222.65. The company during market hours today, 6 January 2016, announced the launch of Imperio, its premium, aspirational pick-up vehicle. Imperio is developed to cater to the transportation needs of small and medium businesses. Imperio will be available in two model variants of single cabin and double cabin and in 3 colours. The vehicle is priced at Rs 6.25 lakh ex-showroom Thane, Mumbai for single cabin BS3 variant.
Index heavyweight Reliance Industries (RIL) rose 2.43% at Rs 1,029.50 on reports that a foreign brokerage has maintained conviction buy on the stock. Commercial launch of broadband services from RIL's telecom unit Reliance Jio Infocomm last month could provide a big positive swing for the company going ahead, the brokerage reportedly said.
Elsewhere in the Asia Pacific region: Taiwan's Taiex index slid 1.1% to 7990.39. South Korea's KOPSI slid 0.3% to 1925.43. Malaysia's KLCI added 0.1% to 1667.97. Singapore's Straits Times index sank 1.1% at 2804.27. Indonesia's Jakarta Composite index added 1.1% to 4609. New Zealand's NZX50 fell 0.3% to 6262.52.
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