Investment rationale for cyclical assets turned bearish as signs of weakness in China's economy added to concern that cuts to U.S. Federal Reserve stimulus will roil emerging markets.
Investor sentiments rattled primarily after survey from HSBC Holdings Plc and Markit Economics indicated Chinese factory output will shrink this month. The HSBC-Markit Flash Purchasing Managers' Index fell to 49.6 in January, down from 50.5 in December, according to Markit. The reading hit a six-month low. Meanwhile, the Flash China Manufacturing Output Index also fell slightly to 51.3 in January from 51.4 in December. The reading also hit a three-month low. The Flash (PMI) is published on a monthly basis ahead of final PMI data, making the HSBC PMI the earliest available indicator of manufacturing sector operating conditions in China.
China's banking regulator ordered its regional offices to increase scrutiny of credit risks in the coal-mining industry, said two people with knowledge of the matter, signaling government concern about possible defaults.
According to media reports, more than $940 billion has been erased from the value of emerging-market equities since the Fed signalled in May that it could start scaling back bond purchases that boosted demand for higher-yielding assets.
Among regional bourses, Australian stock market declined for third consecutive day, as weakness in consumer discretionary, financial and tech counters were more than offset by gain in bullion and materials and resources players. The benchmark S&P/ASX 200 index declined 22.10 points to 5240.90, while the broader All Ordinaries dropped 21.20 points to 5254.30.
Shares of precious metal miners rebounded, on the back of sharp gain for gold futures overnight. Perseus Mining advanced 10.7% to A$0.415 and Kingsgate Consolidated added 6.3% to A$1.19. Australia's biggest gold miner, Newcrest Mining, rose 3.8% to A$9.48 after announcing increased production in the December quarter while cutting costs to A$921 per ounce.
Financials shares were weak, with top four lenders lead retreat. Australia & New Zealand Banking Group was down 1% to A$30.65, National Australia Bank 1% to A$33.82, Westpac Banking Corp 1% to A$31.12 and Commonwealth Bank 0.5% to $74.74.
Sleep disorder equipment maker Resmed (RMD) fell 4.9% to A$5 after announcing disappointing quarterly revenue at its American operations. Total income however rose by 11% to US$86.6 million in the three months to December last year.
Discount retailer The Reject Shop (TRS) dropped 3 3% today to A$11.50 after reporting disappointing Christmas sales figures and pointing to a drop in full year profit.
In Japan, shares in Tokyo market suffered heavy losses today, as risk aversion selloff across the board after disappointing Chinese manufacturing data, mixed US earnings and weaker US dollar against the yen. The benchmark Nikkei-225 index tanked 304.33 points to 15391.56 while the Topix index of all first-section shares sank 22.92 points to 1264.60.
The yen appreciated as demand for safe-haven currency bolstered as weak report on Chinese manufacturing activity and lacklustre U.S. corporate earnings. In afternoon Asian forex trade, the dollar bought 103.27 yen, down from 103.34 yen in New York Thursday afternoon and well below the mid-104 yen level in Tokyo.
Export related stocks stumbled in reaction of drop in the U.S. dollar against the yen below the 103 level, with Hitachi falling 3.4%, Toshiba Corp shedding 1.63% and Sony Corp losing 0.1%.A stronger yen tends to make Japanese products sent abroad more expensive.
Bank of Japan Governor Haruhiko Kuroda said Friday that the Japanese economy is on track and will not be derailed by the coming sales tax hike and that it's too soon for the BoJ to determine in detail how it will exit from non-standard policy. Speaking on a panel at the Annual Meeting of the World Economic Forum, Kuroda said that the sales tax hike, to be implemented in two phases this year and next, "doesn't create additional problems for the economy." He also said it was "premature at this stage" for the BoJ to establish the particulars of a policy exit because it was only a year ago that the target of 2% inflation was set.
In China, shares in Mainland China market advanced as the central bank's money injection this week calmed the market. The Shanghai benchmark provisionally ended 12.21 points higher at 2054.39, while CSI 300 Index added 13.79 points to 2245.68.
The Chinese central bank pumped 120 billion yuan (19.7 billion U.S. dollars) into the money market on Thursday, following this year's first cash injection through reverse repurchase agreement (repo) operations on Tuesday.
Shares of Chinese property developers rose on easing liquidity. China Vanke Co., the nation's largest listed property developer, gained 4.01% to 7.79 yuan per share. Poly Real Estate Group Co., another property heavyweight, went up 3.02% to 8.18 yuan per share.
Materials and resources stocks also ended higher. Jiangxi Copper, the biggest Chinese producer, jumped 1.5% to 13.59 yuan. Aluminum Corp. of China advanced 0.9% to 3.31 yuan.
Investors continued to court newly listed shares. Guirenniao surged 4.66 yuan to 15.26 yuan on the first day of trading in Shanghai. Neway Valve (Suzhou) Co, China's first initial public offering since the year-long listing freeze, rose 4.47% to end the day at 22.65 yuan per share.
In Hong Kong, HK stocks closed weaker for second consecutive day after the Dow plunged 175 points overnight on poor corporate results. The benchmark Hang Seng Index provisionally finished 283.84 points lower at 22450.06.
Mainland Chinese banks listed in Hong Kong were lower on concerns of a possible trust product defaulting after reports said Industrial & Commercial Bank of China may be partly responsible for bailing out investors in a troubled investment trust which raised concerns of defaults on high-yield investment products. Industrial & Commercial Bank of China dropped 1.04% to HK$4.76 and Bank of China 0.90% to HK$3.31, while China Merchants Bank Co sank 2.42% to HK$13.74 and Agricultural Bank of China 0.29% to HK$13.74.
Citic 21CN spurted 372.3% to HK$3.92 after Chinese integrated information and content provider said in a filing that e-commerce giant Alibaba Group Holding and Yunfeng Capital would invest HK$1.33 billion for a more than 54% stake in the company, in a move to use Citic 21CN's drug data and Alibaba's e-commerce capabilities to build a pharmaceutical information platform.
Casino stocks also added to recent weakness after J.P. Morgan recently said the stocks are fairly valued and downgraded MGM China Holdings dropped 4.1% to HK$31.55 and Melco Crown Entertainment shed 1.91% to HK$108.
Civil Aviation Department (CAD) today approved the passenger fuel surcharges for February. The new maximum levels of fuel surcharges will be HK$225 for short-haul flights and HK$929 for long-haul flights, which represent increases of 3% and 2% from the current maximum levels for short-haul and long-haul flights respectively. 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$218 and HK$915 respectively.
In India, key benchmark indices edged lower on the last trading session of the week after the Reserve Bank of India (RBI) governor's strong warning on inflation. Weakness in Asian and European stocks and overnight losses for US stocks also hit sentiment on the domestic bourses adversely. The S&P BSE Sensex lost 240.10 points or 1.12% to settle at 21,133.56, its lowest closing level since 17 January 2014. Among the 30-share Sensex pack, 27 stocks fell and only 3 of them gained.
Realty stocks declined after Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday, 23 January 2014, called inflation a "destructive disease" that was forcing the central bank to keep interest rates high. Purchases of both residential and commercial property are largely driven by finance. DLF (down 3.87%), HDIL (down 4.57%), Sobha Developers (down 0.12%) and Unitech (down 1.83%) declined.
Bank stocks dropped across the board after Reserve Bank of India (RBI) governor Raghuram Rajan on Thursday, 23 January 2014, called inflation a "destructive disease" that was forcing the central bank to keep interest rates high. ICICI Bank (down 1.96%), AXIS Bank (down 0.77%), HDFC Bank (down 0.8%) declined. Among PSU bank stocks, State Bank of India, Union Bank of India, Bank of India, Bank of Baroda and Punjab National Bank shed 2.12% to 5.44%. Canara Bank dropped 6.67% as the stock turned ex-dividend today, 24 January 2014, for the interim dividend of Rs 6.50 per share for the year ending 31 March 2014.
Cairn India fell 0.08% on weak Q3 result. The company after market hours on Thursday, 23 January 2014, reported 14% fall in consolidated profit after tax (PAT) to Rs 2884 crore on 17% growth in revenue to Rs 5000 crore in Q3 December 2013 over Q3 December 2012.
Elsewhere in the Asia Pacific region, New Zealand's NZX50 index decreased 0.76%. South Korea's KOSPI shed 0.36%. Indonesia's Jakarta Composite index dropped 1.31%. Taiwan's Taiex index was up 0.04%. Malaysia's KLSE Composite shed 0.32%. Singapore's Straits Times index dropped 0.78%.
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