Asia Pacific stock market closed mixed on Tuesday, July 16, 2013, as investors paused for breath after weaker-than-expected US retail sales reports and cautious ahead of key testimony from Federal Reserve chairman Ben Bernanke.
Growth in US retail sales eased to 0.4% in June from 0.5% the previous month, the Commerce Department said Monday, missing analyst expectations of a 0.8% rise. Excluding two typically volatile categories, automobiles and gasoline, retail sales dropped 0.1%.
The disappointing US retail sales figures raised doubts about the strength of consumer spending-a key anchor of the recovery-heading into the second half of the year and concerns about slower economic growth.
"The June retail sales number could indicate that the drag from higher payroll and income taxes may still be weighing on the consumer, even as we approach mid-year." said Michael Feroli, chief U.S. economist at JP Morgan.
Apart from doubt about the strength of consumer spending, which is a mainstay of the US economy, an upcoming speech by Bernanke provided another reason for investors to hold back from stocks. Many of the investors retreated on the sideline for more clues about the central bank's commitment to its stimulus program and its outlook for the US economy when Bernanke speaks to Congress on Wednesday.
Bernanke's comments on Wednesday to lawmakers in Congress could well set the tone in markets for the rest of the summer. In particular, investors will be looking for any further guidance on when the Fed will start to reduce its monetary stimulus.
The Fed is currently spending $85 billion buying financial assets in the hope of keeping long-term borrowing rates low and stimulating the U.S. economy. The new money created by the various monetary stimulus that have been enacted in recent years has been one of the key drivers of markets.
Among the regional bourses, Japan's share market closed modest higher after a three-day weekend on tracking the dollar's rise versus the yen. The benchmark Nikkei 225 index added 0.64% to 14,599.12, while the Topix index was up 0.71% at 1,210.54. The market was closed Monday for a national holiday.
However, upside move in the Tokyo bourses were limited as traders awaited the release of minutes from last week's Bank of Japan meeting. Last week, the Bank of Japan announced no material alterations to its massive quantitative easing program, so it might be reasonable to expect the meeting minutes will provide little in the way of surprises. However, previous editions of recently released BoJ meeting minutes have detailed some dissent among central bank members regarding its efforts to reach an inflation target of 2% in two years.
The meeting minutes could carry added significance ahead of upcoming elections for control of Japan's upper house of parliament. Prime Minister Shinzo Abe's Liberal Democratic Party is widely expected to take control of the upper house, which is likely to lead to increased speculation about Abe's focus on restoring Japan's domestic economy, the world's third-largest.
Exporters were broadly higher in Tokyo as the US dollar weakened from the levels seen around Friday afternoon to trade around the 100-yen level. Canon Inc jumped 2.67% to 3460 yen and Nissan Motor Co rose 1.83% to 1115 yen, while Fuji Heavy Industries climbed up 1.71% to 2741 yen after the Nikkei newspaper reported over the weekend that the Subaru-brand vehicle maker is expected to report a record quarterly operating profit.
In Australia, Australian stock market closed meager higher after seesawing in the boundary line as solid showing from miners after Rio's record production report and financials helped to offset losses elsewhere. The benchmark S&P/ASX200 added 0.1% to 4986, while the broader All Ordinaries rose 0.06% to 4968.6.
Rio Tinto jumped 1.4% to A$55.52 after announcing record quarterly production report. Rio on Tuesday, announced it had increased iron ore production by six% to a record 127.2 million tonnes during the first half of the year. The world's second largest iron ore miner also shipped a record 118.6 million tonnes of the steelmaking mineral, a four% lift.
Uranium extractor Paladin Energy climbed 7.29% to A$1.03 after issuing a favorable production forecast and reporting a strong gain for fiscal-year revenue. Australia's largest uranium pure-play produced 8.26 million pounds (mlb) of the heavy metal for the year, in line with guidance, and up 20% on the previous year.
In China, Chinese share market closed notable higher after recouping lost ground late afternoon. the Shanghai Composite Index advanced 6.33 points or 0.31%, to 2,065.72. Positive finishing was mainly credited to solid performances from solar related companies after central government plan to boost the sector and renewed speculation of more stimuli may be unveiled to boost domestic economic growth.
Meanwhile buying spree in Shanghai was also come as China's Securities Journal said in an editorial that the country could tolerate slower economic growth in order to implement structural adjustment and reforms. GDP growth of lower than 7% in certain quarters, or even for the year, would not affect China's long-term goals, the editorials said. But a separate publication, quoting Fan Jianping, the chief economist at the State Information Centre, said China had room for policy maneuvers if it wanted to maintain at least 7.5% growth for this year.
China yesterday posted a slower year-on-year economic expansion of 7.5% in the second quarter, moderating from a growth of 7.7% in the prior quarter.
Shares of solar energy-related companies climbed in Shanghai after China announced plans to add 10 gigawatts of solar power a year during the next three years. China, the world's largest solar panel producer, aims to more than quadruple the country's solar power generating capacity to 35 gigawatts by 2015, according to a statement on the central government's website. TDG Holding Co surged by the daily limit of 10% to 5.58 yuan. Xi'an Longi Silicon Materials Co also jumped 10% to 11.55 yuan.
In India, the Reserve Bank of India's (RBI) liquidity tightening measures to prevent a sharp depreciation of the rupee against the dollar announced after trading hours on Monday, 15 July 2013, pulled the market lower. Nevertheless, the Sensex recovered from a steep intraday slide as index heavyweight ITC rose to record high and as another index heavyweight Reliance Industries (RIL) edged higher in choppy trade. Besides RBI's liquidity tightening measures, South Korean steel major Posco's decision to scrap a large steel project in Karnataka and weakness in European stocks hurt investor sentiment as barometer index, the S&P BSE Sensex, fell below the psychological 20,000 mark and as the 50-unit CNX Nifty fell below the psychological 6,000 mark. The Sensex was provisionally down 147.30 points or 0.74%, up 237.60 points from the day's low and off 3.45 points from the day's high.
The Reserve Bank of India (RBI) after market hours on Monday, 15 July 2013, announced a slew of measures to address exchange rate volatility. RBI raised the Marginal Standing Facility (MSF) rate and Bank Rate each by 200 bps to 10.25% while capped the amount up to which banks can borrow or lend under its daily liquidity window at Rs 75000 crore. Furthermore, RBI will additionally sell Rs 12000-crore of government bonds on Thursday, 18 July 2013, to mop up liquidity from the system, it said. The RBI said it will continue to closely monitor the markets, the liquidity situation and the macroeconomic developments and will take such other measures as may be necessary, consistent with the growth-inflation dynamics and macroeconomic stability.
Finance Minister P. Chidambaram today, 16 July 2013, said RBI's steps to curb rupee liquidity are aimed at quelling excessive speculation and volatility in the forex market and should not be read as a prelude to policy rate changes.
While the rupee surged after the RBI measures, bond prices fell. The rupee was hovering at 59.27 versus dollar, against Monday's close of 59.89/90. In the debt market, the yield on the most traded 8.33 GS 2026 was hovering at 8.2660%, sharply higher than its close at 7.6656% on Monday. Bond yield and bond prices are inversely related.
Elsewhere in Asia, South Korea's Kospi fell 0.5% to 1,866.36, while Taiwan's Taiex edged up 0.07% at 8260.11. Hong Kong's Hang Seng was up meager 0.04% at 21,312.38. Indonesia's JKSE rose 0.18% to 4644.04. Malaysia's KLSE Composite closed tad 0.02% down at 1786.39, while Singapore's STI declined 0.37% to 3224.96.
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