Asia Pacific share market declined sharply on Thursday, June 13, 2013, as risk aversion selloff across the board amid mounting worried about a potential reduction in central-bank stimulus. Meanwhile renewed uncertainty about Greece intensified selling.
Global investors continued offloading risky assets for third straight day amid doubts about monetary policy. The Bank of Japan left its lending program unaltered Tuesday, joining the European Central Bank, which last week kept its main refinancing rate unchanged. Uncertainty over when the Fed might start to pare back its bond buying has roiled financial markets recently.
Asia Pacific market lost over 10% since May 22, which qualifies as a "correction," after comments from U.S. Federal Reserve Chairman Ben Bernanke about potential reductions in bond buying. The Federal Reserve Chairman Ben Bernanke said on May 22 that the central bank could cut back on its monetary stimulus if the labor market shows "sustainable improvement."The Federal Open Market Committee will hold a two-day meeting next week.
Many of the market pundits expects the US Federal Reserve to scale back the size of its bond purchases, intended to prop up the economy, by the end of the year, while some expects reduced buying as early as September. The Fed is currently buying $85 billion per month of Treasuries and mortgage-backed securities in an effort to hold interest rates at very low levels and spur employment growth.
Meanwhile, worries over Greece were back in the spotlight on Wednesday, after equity-index provider MSCI Inc. moved the country to emerging-market from developed status late Tuesday.
Furthermore, market sentiments were further deteriorated after World Bank revised down growth prospect of global economy. The World Bank has cut its global economic growth forecast to 2.2% in2013 as against 2.4% forecast earlier this year. The World Bank said in the newly-released Global Economic Prospects report that the risks from advanced economies have eased and growth is firming, despite ongoing contraction in the Euro Area. However, the pick-up in developing countries will be modest because of capacity constraints in several middle income countries
Developing-country GDP is now projected to be around 5.1% in 2013, strengthening to 5.6% and 5.7% in 2014 and 2015, respectively. Growth in Brazil, India, Russia, South Africa and Turkey has been held back by supply bottlenecks. While external risks have eased, growth in these countries is unlikely to reach pre-crisis rates unless supply-side reforms are completed. In China also, growth has slowed as authorities seek to rebalance the economy. Looking at broader region-wide trends, the East Asia & Pacific region is expected to grow by 7.3% this year; Europe & Central Asia by 2.8%; Latin America & the Caribbean by 3.3%; Middle East & North Africa by 2.5%; South Asia by 5.2%; and Sub-Saharan Africa by 4.9%.
For high-income countries, fiscal consolidation, high unemployment and still weak consumer and business confidence will keep growth this year to a modest 1.2%, firming to 2.0% in 2014 and 2.3% by 2015. Economic contraction in the Euro Area is projected to be 0.6% for 2013, compared with the previous projection of 0.1%. Euro Area growth is expected to be a modest 0.9% in 2014 and 1.5% in 2015.
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In the Asia Pacific market, the Japanese market stumbled sharply, leading the regional decliners as a strengthening yen and losses on Wall Street overnight prompted broad based selling. The Nikkei Stock Average stumbled 6.35% to 12,445.38. The benchmark was slicing about 20.4% off its peak of 15627.26 on May 22, and meeting the typical definition of a bear market. The benchmark index fell to its lowest close since April 3, the day before the Bank of Japan began its latest round of monetary easing. The loss was the second largest so far this year.
The sharp selloff in the Tokyo came amid uncertainty over US monetary policy and spike in Yen against the greenback. The selling pressure steepened against the backdrop of fears the Fed will taper down its bond purchases and follows this week's Bank of Japan meeting, where the Japanese central bank disappointed those who had been expecting more QE firepower in view of recent volatility. The U.S. dollar fell as low as 93.76 yen during the session, nearly two full yen lower than the 95.61-yen level seen in North America late on Wednesday.
In Australia, the Australian share market fell down, dragging the benchmark S&P/ASX200 index 0.6% down to finish at 4695.80, its lowest close since January 8. Today's losses mean the market has lost just over 10% since its May 14 highs, which qualifies as a "correction" (20% fall would be a bear market). Except financials and property trusts all sectors dived into sea of red, with heavyweights of materials, bullion, energy, consumer goods, retailers, industrials, and tech companies all ended notable down. Financials- banks and insurers - bucked the trend as investors sought the safety of higher-yielding stocks, with the sector posting a 0.7% rise.
The Australian Bureau of Statistics (ABS) said on Thursday that the Australia's seasonally adjusted unemployment rate was estimated at 5.5% in May. The ABS reported the number of people employed increased by 1,100 to 11,663,300 in May. The increase in employment was due to increased part-time employment, up 6,400 people to 3,509,600, offset by decreased full-time employment, down 5,300 to 8,153,600. The increase in total employment was mainly driven by an increase in male part-time employment. The number of people unemployed decreased by 3,600 people to 682,900 in May, the ABS reported. The ABS monthly seasonally adjusted aggregate hours worked series showed a decrease in May, down 11.5 million hours to 1,628.5 million hours. The ABS reported a seasonally adjusted labour force participation rate decrease of 0.1 percentage points to 65.2% in May. The seasonally adjusted underemployment rate was 7.4% in May 2013. Combined with the unemployment rate of 5.5%, the latest seasonally adjusted estimate of total labour force underutilization was 12.9% in May.
In China, Shanghai-listed shares stumbled, as accumulating signs of a slowdown in growth in the world's No. 2 economy caused investors to retreat. The Shanghai Composite Index slid 2.8% to 2,148.35 while the smaller Shenzhen Composite Index lost 2.9% to 955.26. Selloff pressure dominated broadly, with shares of financials, industrials, resources and real estate companies led downfall amid mounting concerns about China's shaky economic recovery after weaker than expected economic data released during weekend.
Chinese investors received first a chance to react to a string of downbeat economic data released over the weekend, including the monthly trade, inflation, slowing industrial production and tight money supply figures. Domestic market was closed from Monday till Wednesday for Dragon Boat Festival holiday.
Exports rose a meager 1% in May, down from double-digit growth rates in months before China began to crack down on hot money inflows. Imports posted a 0.3% decline, a fresh sign of waning domestic demand.
The World Bank yesterday cut its 2013 economic growth forecast for China to 7.7%, down from its earlier estimate of 8.4% because Chinese policymakers are shifting from investment-fueled growth to consumption-led growth.
In Hong Kong, HK stocks closed sharply lower in volatile trade in tandem with a triple whammy selloff in Japan, mainland China and the U.S. overnight. The Hang Seng Index closed today at 20887.04, down 467.62 points or 2.19%, after falling to a lowest of 20652.75. Stock turnover totaled HK$87.74 billion today, the highest for the past 3 months.
In India, key Indian shares declined for third consecutive session on heavy selling by funds and retail investors owing to weak global cues, dragging the Sensex down 239.41 points or 1.26% at 18801.72, and the Nifty down 64.50 points or 1.12% at 5695.70 (provisional). Foreign institutional investors (FIIs) provisionally sold 10.60 billion rupees worth of Indian stocks on Wednesday, selling a total of about 19 billion rupees in the last two sessions, as per exchange and regulatory data. Apollo Tyres shares provisionally fell 26% as its buy of US-based Cooper Tire & Rubber Co for about $2.5 billion raised concerns about its debt levels. Sun Pharmaceutical Industries declined 3.2%after the company settled a patent suit with Pfizer Inc related to its acid-reflux drug for $550 million.
Elsewhere in the region, Singapore's Straits Times Index lost 1.5% to enter a so-called correction territory widely regarded as a 10% drop from a recent peak, while Indonesia's Jakarta Composite index, which was already in correction territory, down 1.9%. South Korea's Kospi lost 1.4%. Taiwan's Taiex shed 2%. Malaysia's KLSE lost 1.8%. New Zealand's NZX50 dropped 0.9%.
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