Asia Pacific shares closed mixed on Thursday, 21 August 2014, as early gains dissipated by a weak China manufacturing survey. The MSCI Asia Pacific excluding Japan Index slid 0.6 percent to 509.71. The measure closed yesterday at a more than six-year high.
The HSBC Flash China Manufacturing Purchasing Managers' Index, the earliest available indicator of China's industrial sector, moderated to a three-month low of 50.3 in August, compared to the final reading of 51.7 in July, according to HSBC and research firm Markit. A reading above 50 means expansion, and the figure for August marked a three-month low after it delivered the best performance in 16 months in July.
Qu Hongbin, chief economist for China at HSBC, said both domestic and external new orders rose at slower rates compared with the previous month." The data suggest that the economic recovery is still continuing, but its momentum has slowed again," Qu said. "Therefore, industrial demand and investment activity growth will likely stay on a relatively subdued path." Qu said both monetary and fiscal policy should remain accommodative until there is a more sustainable rebound in economic activity.
The China's data followed a disappointing economic data from Europe. A separate survey for the 18-country eurozone that covers both manufacturing and services showed growth was weak in August suggesting the economy is not bouncing back strongly from a poor second quarter in which it was stagnant. A purchasing managers' index for both industries fell to 52.8 this month from 53.8 in July, Markit Economics said.
Risk sentiments were muted as investors were still digesting the minutes from the U.S. Federal Reserve's last meeting, which showed the majority of Fed policymakers believe the U.S. economy is improving enough for the central bank to start raising interest rates sooner than previously thought. The debate on when the Fed should begin hiking rates, which have been near zero since 2008, has intensified in recent months as the Fed winds down its other economic stimulus.
Expectations of an end to the Fed's easy monetary policy pushed the dollar. Higher interest rates in the U.S. could be a boost for countries such as Japan where giant exporters have much to gain from a strong dollar. But in South Korea, investors were jittery it could prompt foreign investors to sell their stockholdings.
Traders are also awaiting for annual Jackson Hole, Wyoming, summit in the US, which brings together business heads and central bankers from around the world. Federal Reserve chair Janet Yellen and her European counterpart Mario Draghi are both scheduled to address delegates on Friday. Fed Chair Janet Yellen speech will be closely watched by markets for clues to her thinking on the timing of interest rate hikes.
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Among Asian bourses
Nikkei rises for ninth straight session on weak yen
Japanese share market extended winning streak for ninth consecutive session, buoyed by tracking solid gains for Wall Street overnight and a significantly weaker yen. The benchmark Nikkei 225 index advanced 131.75 points to 15,586.20, notching up a ninth day of gains. The Topix index of all first-section issues climbed 0.90%, or 11.55 points, to 1,291.19.
Stock-buying sentiment was mainly boosted by a jump in the dollar to a four-and-a-half month high after comments by U.S. Federal Reserve Bank officials indicating that a surprisingly strong jobs market recovery could trigger an earlier-than-expected interest rate increase by the central bank.
Shares of exporters and financial companies were top gainers in the Tokyo market. A stronger dollar makes exporter shares more attractive, as it increases profits overseas in yen terms while enabling them to market the goods they sell abroad at more competitive prices. The inflationary effect on the yen also boosts the value of financial institutions holding troves of securities, as well as land assets. As of the close of trading, the greenback was changing hands at Y103.86, up from Y103.20 a day ago.
Among yen sensitive exporters, Honda Motor added 2.3% and Fuji Heavy Industries gained 2.1%. Among yen sensitive stocks financials, Mitsubishi UFJ Financial Group was up 2.0% and Sumitomo Mitsui Financial Group added 1.4%. Among major securities houses, Nomura Holdings added 4.3%, while Daiwa Securities Group rose 2.6%. Mitsui Fudosan and Mitsubishi Estate led land developers higher, adding 2.3% and 1.7%, respectively.
Nissin Foods Holdings climbed 2.2% after announcing that Indonesia's PT Indofood Sukses Makmur Tbk, a leading global instant noodle maker, will sell its entire 49% stake in one of its units to the Japanese company for $5.4 million.
Mazda Motor rose 2.8% on reports that the company plans to become effectively debt-free by the fiscal year ending March 2017, by tapping into increased cash inflows from its core business to repay liabilities.
Australia stocks rise for the sixth day in a row
Australian share market closed marginal higher, extending winning streak for sixth consecutive session, as gain in technology, telecom, energy and realty stocks were more than offset by losses in consumer goods, retailers, and materials stocks. The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each rose by 0.1% to 5638.90 points and 5634 points, respectively.
Financial markets data systems provider IRESS was the best-performing stock in the ASX 200, climbing 11.1% to A$9.80, as it showed a 47.9% pick-up in underling profit for the six months to June.
Household appliance maker Breville was the worst performer, dumping 18.6% to A$7.10, despite lifting its final dividend. Shares slumped following the surprise resignation of chief executive Jack Lord as the company revealed a 1.9% drop in full-year net profit.
Materials and resources stocks closed down, with resources giant BHP Billiton falling 0.3% to A$38.03, extending the previous session's slide and following a raft of analyst downgrades to "sell" in reaction to Tuesday's A$16 billion demerger announcement. Main rival Rio Tinto fell 0.6% to A$65.60. Fortescue Metals sank 1.5% to A$4.48. The spot price for iron ore, delivered in China, was 0.8% lower at $US92.30 a tonne.
Shanghai Composite falls 0.44% on weaker PMI data
Mainland China share market closed down for second straight session amid risk aversion selloff after a closely watched survey showed Chinese factory activity at a three-month low. The benchmark Shanghai Composite closed 9.75 points down at 2230.46. Turnover increased to 140.09 billion yuan from yesterday's 139.63 billion yuan.
Shares of financial and energy companies suffered heavy losses in Shanghai market, as a bigger-than-estimated drop in a private manufacturing gauge spurred concerns about the strength of the economic recovery. Ping An Bank dropped 1.2%. China Citic Bank Corp. fell 1.4% and Citic Securities Co. dropped 1.9%. China Shenhua Energy Co. slid 1.4% to lead declines for coal companies. Yanzhou Coal Mining Co. lost 1.5%.
The Ministry of Finance said on Wednesday that combined profits of China's SOEs rose 9.2% year on year to 1.43 trillion yuan (US$232.2 billion) during the January-July period, accelerating slightly from the 8.9-percent rise for the first half of the year. Total business revenues for the State firms increased 5.8% from a year ago to 27.2 trillion yuan in the first seven months, while operating costs rose at a faster pace of 6% to 26.26 trillion yuan. By the end of July, SOEs' total assets stood at 97.87 trillion yuan, while liabilities grew 12.2% year on year to 63.85 trillion yuan. Between January and July, steel, transportation and building materials companies reported higher profits, but coal and chemical industries saw notable drops in profits.
Hang Seng falls 0.66% from six-years high
Hong Kong share market closed lower, as disappointing China manufacturing data sparked profit-taking in banks and resources, leaving some investors wary of a another pullback in the market. The Hang Seng Index dropped 0.66%, or 165.66 points, to 24994.10, after yesterday climbing to its highest since May 2008. Market turnover stood at HK$75.52 billion, up from HK$70.36 billion on Wednesday.
Coal producers declined. China Shenhua, China's biggest producer of the fuel, slipped 1.5% to HK$22.95. Yanzhou Coal Mining Co. dropped 0.9% to HK$6.68.
China Resources Enterprise fell 2.9% to HK$23.25 after reporting weaker than expected results today. The company said its profit dropped 8.7% year-on-year to HK$929 million for the six months ended 30 June 2014. The turnover was HK$83,506 million, an increase of 16.2% from a year earlier.
China Resources Power rose 3% to HK$23.8 as JP Morgan raised its target price. JP Morgan lifted its target price for China Resources Power to HK$28.5 from HK$26.6 on higher earnings forecast, and maintained its "overweight" rating. The positive surprises were mainly driven by lower coal prices (unit fuel costs down 11.7%), and strong profit growth from the renewable energy segment (+24%). JP Morgan expects CRP's unit fuel cost to fall by 8% in 2014.
ZTE Corp shares added 2.4% to HK$17.1 after it reported a surge in its interim earnings and issued a positive profit alert. The Company said its net profit attributable to shareholders for the six months ended 30 June 2014 surged 263.92% year-on-year to Rmb1128 million. Operating revenue amounted to Rmb37,697 million, an increase of 0.51% from a year earlier. ZTE estimated that the accumulated net profit for the nine months ended 30 September 2014 to jump about 208.19% to 244.45% year-on-year to about Rmb1.7 billion to Rmb1.9 billion.
Sensex, Nifty eke out small gains
Indian stock market edged higher in choppy trading session on the back of small gains in European stocks and further fall in crude oil prices. However, the gains for the key indices were small. Some progress was made on proposed goods and services tax (GST) after the empowered committee of state finance ministers on Wednesday, 20 August 2014, reportedly decided the common threshold for levy of GST.
The S&P BSE Sensex rose 45.82 points or 0.17% to settle at 26,360.11, its highest closing level since 19 August 2014. The CNX Nifty rose 15.80 points or 0.2% to settle at 7,891.10, its highest closing level since 19 August 2014.
Metal and mining stocks declined after the Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi, yesterday, 20 August 2014, approved the revision of rates of royalty and dead rent of all major minerals. PSU OMCs surged as crude oil prices fell. Shares of jewellery retailers rallied with Titan Company scaling a record high after a foreign brokerage upgraded the stock to overweight from equal-weight.
Bank stocks rose after Finance Minister Arun Jaitley reportedly said today, 21 August 2014, that the government was working to tighten up risk management in the banking sector. Axis Bank rose after the bank said its Board of Directors at a meeting held today, 21 August 2014, approved issuance of long term bonds/non-convertible debentures upto Rs 6000 crore on a private placement basis. Kotak Mahindra Bank scaled record high after the bank said a promoter group firm sold a 0.2% stake in the bank to comply with the central bank's guidelines on equity holding in local banks. L&T rose in volatile trade after the company said its construction division won new orders worth Rs 1832 crore from across various business segments in July and August 2014. Shares of power generation and power distribution companies edged lower.
Elsewhere in the Asia Pacific region-- South Korea's KOSPI index fell 1.4% to 2044.21. Taiwan's Taiex index gained 0.4% to 9253.38. Malaysia's KLCI fell 0.2% to 1874.81. New Zealand's NZX50 added 0.24% to 5152.92. Singapore's Straits Times index rose 0.01% to 3324.09. Indonesia's Jakarta Composite index rose 0.3% to 5206.14.
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