Asia Pacific market declined in narrow and quiet trade on Wednesday, September 25, 2013, amid concerns over the U.S. fiscal and monetary policy outlook.
Investment rationale for the risk assets was subdued for second straight day as concern that U.S. lawmakers will fail to arrange a budget deal preventing a government shutdown next week.
Investors were retreating on the side-line to monitor discussions in Washington over the raising of the U.S. debt ceiling. The government will reach its borrowing limit, or debt ceiling, by Oct. 1. If Congress doesn't raise that limit, the government won't be able to pay all its bills, possibly shaking confidence in the world's biggest economy. That leaves just days for the White House and Republican lawmakers, who disagree on spending cuts and other key budget issues, to reach a compromise. Republicans are demanding that any increase must result in expenditure cuts of an equal amount. President Barack Obama is demanding a debt limit increase with no conditions attached.
President Barack Obama on last Saturday insisted that he won't negotiate with House Republicans over the debt ceiling, accusing them of threatening to plunge the U.S. into default and back into recession by tying the debt limit to their effort to defund his health-care law. The White House said Obama would veto the House bill and Senate Majority Leader Harry Reid said the bill is dead on arrival. Investors, meanwhile, are poised for fresh market turmoil as politicians hurtle toward the latest budget-related showdown.
Moody's stated that neither an impasse over the debt ceiling nor a government shutdown should hurt the US sovereign credit rating. According to the agency, these events would affect the short-term outlook while the rating is based more on the long-term outlook for the debt, rather than what we think will be short-term events. Meanwhile, Moody's believed that the US would keep paying interest on Treasuries should there be a debt ceiling stalemate.
Meanwhile, the market was also a bit nervous because there are conflicting signals from US central bank officials over the future of their stimulus policy. The Federal Reserve surprised the market last week when it said it would keep its massive stimulus program going in full. However, New York Federal Reserve chairman William Dudley has since said the Fed has a tapering timetable, and will wind down the bond purchases when there is broad improvement in the American economy. Further, Fed Bank of Atlanta President Dennis Lockhart said monetary policy should focus on creating a more dynamic economy and Fed Bank of Dallas President Richard Fisher said the central bank harmed its credibility with the decision last week.
Among Asian bourses, shares of the Tokyo market declined today, weighing the benchmark Nikkei Stock Average 0.76% down to finish at 14620.53.
Investors in Tokyo were indulged into profit booking for third straight day in the Japanese market as yen appreciated to the mid-98 yen range against the dollar on uncertainty over the U.S. fiscal and monetary policy outlook. The Japanese currency was changing hands at 98.63 yen for one U.S. dollar versus 98.74 late Tuesday in New York.
Shares of Tokyo Electron were locked 640 yen or 13.2% upper circuit at 5490 yen after the Japanese semiconductor production equipment maker announced it and Santa Clara-based Applied Materials Inc. have agreed to merge their operations, in move that will create a firm with a market capitalization of $29 billion. Under the accord, one Tokyo Electron share will be exchanged for 3.25 shares of the new entity. Meanwhile, one Applied Materials share will exchanged for one share of the new company. The two firms will be united in a joint holding company in the Netherlands.
In Australia, Australian share market advanced for the first time in four sessions, with shares in the financials, energy and consumer goods sectors led rally. The benchmark S&P/ASX200 advanced 41.70 points, or 0.8%, to 5275.90, while the broader All Ordinaries added 40.60 points, or 0.78%, to 5270.10.
Shares of retailers were sharp higher in Sydney, led by department store David Jones, which rose 4.9% to A$2.99 despite a 6% fall in its annual net profit to A$95.2 million. The upmarket retailer reported a FY13 profit of A$95.2 million, down 5.9% on last year. The result included a A$9.1 million tax charge related to selling its electronics division to Dick Smith.
Fortescue Metals Group surged 3% to A$4.86, on the top of 2.8% gain prior day, after founder and Chairman Andrew Forrest bought more than 5.2 million shares for a total price of A$23.6 million, taking his ownership to 33%.
Shares of Nufarm fell 0.4% to A$4.86. Agricultural chemicals and seeds supplier today announced a statutory profit after tax of A$81.0 million for the 12 months to 31 July, 2013. This compares to a statutory profit after tax of A$72.6 million in the previous financial year. Group revenues increased by just over 4% to A$2.28 billion (2012: A$2.18 billion).
In China, Chinese financial market fell down for second day today, dragging the benchmark Shanghai Composite Index 9.02 points, or 0.41%, lower at 2198.52, with industrials, energy and materials blue chips led declines.
China's annual economic growth is likely to fall to below 6% by 2015, said Nouriel Roubini, economist and chairman of Roubini Global Economics. China needs to reduce its savings rate, which remains above 50% of gross domestic product, and raise its domestic consumption, currently at 30% of gross domestic product, Roubini said yesterday. But these reforms will occur more gradually than desirable, he said. As a result, China's economic expansion will slow to 7% early next year and fall below 6% by the end of 2015, he said.
In Hong Kong, HK shares rose modestly in narrow and quiet trade, sending the benchmark Hang Seng index higher by 30.59 points, or 0.13%, from prior day to end the day at 23209.63. The gain in city bourse came after two previous sessions of declines, with shares in banking and telecom companies lead rally.
Among the 50 HK blue chips, 25 rose and 23 fell, with two stocks remaining steady. China Merchants soared 5.1% to HK$28.8 on Goldman Sachs' upgrade, while China Coal fell 3.3% to HK$4.75, making themselves the top blue-chip gainer and loser.
The Civil Aviation Department (CAD) of Hong Kong today approved the passenger fuel surcharges for October. The new maximum levels of fuel surcharges will be HK$229 for short-haul flights and HK$935 for long-haul flights, which represent increases of 6% and 4% from the current maximum levels for short and long-haul flights. Passenger fuel surcharges are reviewed by the CAD on a monthly basis. In last month's review, the maximum surcharge levels for short-haul and long-haul flights approved by the CAD were HK$217 and HK$897.
In Singapore, shares Singapore shares end flat Wednesday for the second day running as investors weigh the prospects of a fractious legislative battle in the U.S. over the federal budget and debt ceiling. The 30-share STI loses just 3.17 points, or 0.1%, to end at 3208.58, closing in the red for the fourth-straight session.
In India, Indian benchmark indices edged lower in choppy trade, with the market sentiment hit adversely by the government's failure to raise fuel prices. However, the key benchmark indices trimmed intraday losses as the rupee edged higher against the dollar and as European stocks reversed intraday losses. Volatility was high ahead of the expiry of the near month futures & options (F&O) contracts tomorrow, 26 September 2013. The market breadth, indicating the overall health of the market, was negative. The barometer index, the S&P BSE Sensex, shed 63.97 points or 0.32%, up close to 197 points from the day's low and off about 122 points from the day's high.
Among the sectoral indices on BSE, the S&P BSE Power index (up 1.84%), the S&P BSE Capital Goods index (up 1.45%), the S&P BSE Healthcare index (up 1.27%), the S&P BSE Metal index (up 1.17%), the S&P BSE PSU index (up 0.93%), the S&P BSE Teck index (up 0.54%), the S&P BSE IT index (up 0.05%) and the S&P BSE Auto index (down 0.07%), outperformed the Sensex. The S&P BSE Consumer Durables index (down 0.35%), the S&P BSE Realty index (down 0.56%), the S&P BSE Bankex (down 0.94%), the S&P BSE FMCG index (down 1.12%) and the S&P BSE Oil & Gas index (down 1.36%), underperformed the Sensex.
The Indian government's decision on Tuesday, 24 September 2013, not to raise fuel prices sparked concerns about the government's fiscal deficit. PSU OMCs, which control more than 90% of the fuel-retail market in India, sell diesel and cooking fuels at government-set discounted prices. The government partially reimburses them for the discounted sales.
Elsewhere, New Zealand's NZX50 jumped 1.2%.Taiwan's Taiex fell 0.18% and South Korea's KOSPI shed 0.45%. Indonesia's JKSE Composite dropped 1.2% and Malaysia's KLSE Composite fell 0.47%
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