Asia Pacific Market: Stocks fall on fears of Fed interest rate hike

Asia Pacific share market ended down on Monday, 12 September 2016, as fears the Federal Reserve will soon raise interest rates continued to spook investors out of risky assets. Meanwhile, selloff pressure followed on growing concerns that the European Central Bank and the Bank of Japan may be slowing their monetary policy easing efforts.

Stocks met with selling from the outset of trading after the U.S. Dow Jones industrial average tumbled over 390 points on Friday on the back of growing speculation about an interest rate hike by the U.S. Federal Reserve, possibly next week, following remarks by a senior Fed official.

Federal Reserve Bank of Boston President Eric Rosengren said in a speech, My personal view is that a reasonable case can be made for continuing to pursue a gradual normalization of monetary policy, noting, It is quite possible that we will reach or even exceed full employment over the course of the next year.His remarks splashed cold water on the market as he had been considered a dovish policymaker in the Fed.

Since December, Federal Reserve chair Janet Yellen has repeated that future rate rises would be gradual, depending on jobs growth and inflation rising closer to the Fed's target of 2%. However, after nine months without further action, Mr Rosengren's comments have been interpreted as a sign that next week's Fed meeting may be the time for an overdue rate hike.

Three more Fed officials are expected to speak later on Monday, including board member and noted dove Lael Brainard, who is known to be dovish on rates, and any hint of hawkishness would likely further pressure bonds and equities.

Risk was also off the table on concerns that there is a possible slowdown in the monetary easing efforts of the European Central Bank (ECB) and the Bank of Japan (BoJ) as well. As per reports, the Bank of Japan may look to steepen the Japanese yield curve at a policy review this month, with markets worried that, if it goes down that path, tapering buying of long-dated bonds may be among the options. Super-low bond yields have made returns on equities seem relatively more attractive, so any sustained climb in yields would likely weigh on stock valuations.

Crude Oil prices extended Friday's 4% fall in Asia after reports showed increasing drilling activity in the United States, indicating that producers can operate profitably around current levels and bring on new supply. Brent crude was off 47 cents, or about 0.98%, at $47.54 a barrel, while U.S. crude lost 59 cents to $45.27.

Among Asian bourses

Australia ASX200 sinks 2.24%

Australian share market declined, as investor sentiment was rattled by tracking steep plunge in Wall Street on Friday amid concerns that the US Federal Reserve could be considering an imminent interest rate hike. All ASX sectors declined, with materials and resources, industrials, energy, realty, and financial issue being major losers. At close of trade, the benchmark S&P/ASX 200 index stumbled 119.60 points, or 2.24%, to 5,219.60, while the broader All Ordinaries index has lost 121.40 points, or 2.23%, to 5,319.10.

Resources and energy stocks were under severe pressure as a strengthening US dollar weighed heavily on commodities. In the mining space, mining giant BHP Billiton skidded 4% to A$19.94, its primary rival Rio Tinto lost 2.5% to A$47.41 and iron ore miner Fortescue weakened 5.1% to A$4.70. Among oil stocks, Oil Search sank 2.7% to A$6.58, Woodside Petroleum 2.7% t A$27.57, and Santos 5.3% to A$3.79 after crude oil prices extended Friday's 4% fall in Asia after reports showed increasing drilling activity in the United States, indicating that producers can operate profitably around current levels and bring on new supply.

All big four banks fell, with Commonwealth Bank erasing 0.9% to a five-month low of A$70.22, while National Australia Bank dropped 2.6% to a one-month low of A$26.60, Westpac lost 1.7% to A$29.03, and ANZ fell 2.1% to A$26.19.

Japan Stocks tumble on rising US rate hike bets

The Japan share market ended steep lower, dragged down by renewed fears of a US Federal Reserve interest rate hike in the near term and a slump in oil prices. Meanwhile, risk aversion selloff fuelled further amid concerns that the European Central Bank and the Bank of Japan may be slowing their monetary policy easing efforts. Every industry category on the main section lost ground, led by mining, iron and steel, and financial issues. The 225-issue Nikkei lost 292.84 points, or 1.73%, to finish at 16,672.92 on the Tokyo Stock Exchange. The Topix index of all first-section issues lost 20.76 points, or 1.54%, to close at 1,323.10

Export-oriented names were downbeat, including automaker Toyota, camera maker Canon, electronic parts producer Murata Manufacturing and industrial robot maker Fanuc. Oil wholesalers Inpex, Japex and JX Holdings also met with selling, due to lower crude oil prices.

Kumiai Chemical Industry sagged 12.4%, after the agrochemical manufacturer on Friday downgraded its profit forecast for the business year through October.

Ono Pharmaceutical shed 2.8%, after the Nikkei business daily reported Saturday that a U.S. cancer drug is set to be approved by the Japanese government for treatment, the first rival product for the drugmaker's Opdivo.

Don Quijote Holdings declined 3.1%, after the discount store operator said Friday its sales in August fell from a year earlier on a same-store basis.

Benesse Holdings was down 2.4%, after the correspondence education service provider said Friday it will replace its president in October following a reshuffle only three months ago, raising concern about the firm's management.

Coca-Cola East Japan gained 1.4%, after the beverage company on Friday upgraded its profit projection for the business year through December.

China Stocks retreat on possible U.S. rate hike

Mainland China stock market closed lower, as investors sold stocks and riskier assets, including commodities, on fresh talk of an interest rate hike by the Federal Reserve in the near term. Most listed companies saw falling shares, with industrial giants in resources, finance and automobile sectors hit the hardest. The CSI300 index of the largest listed companies in Shanghai and Shenzhen eased 1.67%, to 3,262.60 points, while the Shanghai Composite Index lost 1.85% to 3,021.98 points.

Most listed companies saw falling shares, with industrial giants in resources, finance and automobile sectors hit the hardest. Zhongjin Gold lost 5.82% to close at 12.31 yuan and Ping An Bank fell 2.35% to close at 9.16 yuan.

Hong Kong Market stumbles 3.36%

The Hong Kong stock market fell back sharply, dragged down by a plunge in U.S. equities late last week amid growing speculation about an interest rate hike by the U.S. Federal Reserve, possibly next week, following remarks by a senior Fed official. The benchmark Hang Seng Index stumbled 809.10 points, or 3.36%, to 23290.60 points. The Hang Seng China Enterprises Index, a benchmark measure of performance of mainland China enterprises, slipped 403.89 points, or 4.02%, to 9654.08. Turnover decreased to HK$94.6 billion from HK$116.8 billion on Friday.

Belle (01880) was unchanged at HK$5.18, becoming the best performing blue chip. The company reported 2Q footwear SSS declined 10%, but both Macquarie and Credit Suisse issued bullish comment on the company's outlook.

Property counters were lower on rising expectations for rate hike. CK Property (01113) slipped 3.8% to HK$56.25. Henderson Land (00012) softened 3.4% to HK$45.8.

Chinese banks are actively launching different measures to speed up the disposal of bad debts. CCB (00939) plunged 5.4% to HK$5.77. ICBC (01398) slid 4.6% to HK$4.83. BOC (03988) fell 4.3% to HK$3.56. AAC Tech (02018) dived 8.4% to HK$79.3. It was the worst blue-chip loser today.

Oil majors were lower as oil prices slid 4%. Sinopec (00386) fell 2.7% to HK$5.42. CNOOC (00883) slipped 2.7% to HK$9.43.

India Nifty settles at 2-week low

India's benchmark stock indices fell the most in two-and-a-half months, in line with a meltdown in world equities, as fears that the US Federal Reserve may raise rates as early as September triggered a flight to safety. The barometer index, the S&P BSE Sensex, lost 443.71 points or 1.54% to settle at 28,353.54. The Nifty fell 151.10 points or 1.7% to settle at 8,715.60. The Sensex settled at almost 2-week low.

Banks stocks declined after Fitch Ratings has said in a report that the progressive increase in minimum capital requirements under Basel III is likely to put nearly half of Indian banks in danger of breaching capital triggers. State-run banks are the most at risk, given their poor existing capital buffers and weak prospects for raising capital through market channels, Fitch said. Fitch estimates that Indian banks will require around $90 billion in new capital by FY 2019 to meet Basel III standards, with the state banks accounting for about 80% of the total. According to Fitch, state-run banks will continue to face difficulties in raising capital from the market, which will keep their Viability Ratings under pressure and will weigh on the sector outlook.

Housing Development and Infrastructure (HDIL) fell 10.85% after consolidated net profit fell 30% to Rs 40.89 crore on 2.7% decline in total income to Rs 265.21 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Saturday, 10 September 2016. HDIL said that it follows project completion method and accordingly results on quarter to quarter basis may not be comparable.

Reliance Defence & Engineering dropped 13.51% after the company reported net loss of Rs 134.50 crore in Q1 June 2016 compared with net loss of Rs 167.27 crore in Q1 June 2015. Total income dropped 34.21% to Rs 74.18 crore in Q1 June 2016 over Q1 June 2015. The result was announced on Saturday, 10 September 2016.

Lanco Infratech shed 6.43% after the company reported consolidated net loss of Rs 448.88 crore in Q1 June 2016 higher than net loss of Rs 316.27 crore in Q1 June 2015. Net total income from operations rose 10.1% to Rs 1727.99 crore in Q1 June 2016 over Q1 June 2015..

Elsewhere in the Asia Pacific region: South Korea's KOSPI index fell 2.3% to 1991.50. Taiwan's Taiex index slumped 1.2% to 8947.06. Stock market in Singapore, Malaysia, and Indonesia closed for official holiday.

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