Asia Pacific share market declined on Tuesday, 05 July 2016, as downturn triggered by following fall in major European stock markets overnight and concerns over global growth dampened investor sentiment. Meanwhile selloff pressure mounted on caution ahead of important U.S. economic indicators scheduled to be released later this week, including June jobs data due out Friday. Markets were also affected by a slide in oil prices after analysts predicted demand will weaken amid concerns about the global economic outlook.
Britain's vote to leave, termed Brexit, has ramped up the urgency for some Asian central banks to ease monetary policy, as a prolonged period of uncertainty might lead a wider downshift in trade and investment.
Investors were wary of renewed Brexit concerns that saw European stocks finish lower on Monday. In the U.K., the ramifications of the country's vote to quit the European Union (EU) continued to sink in. Nigel Farage, leader of the U.K. Independence party and a key Brexit campaigner, announced he was standing down, saying his "political ambition" had been achieved with the Brexit vote. His departure came after another key Brexit campaigner, Boris Johnson, ruled himself out of the running to become the U.K.'s next prime minister. Incumbent David Cameron, a remain campaigner, said after the Brexit referendum that he would step down by October.
Uncertainty over Britain's future following the Brexit vote weighed Markit's construction PMI for the U.K., which dropped to 46.0 in June from 51.2 in May, marking its lowest level in seven years, with output falling at its fastest pace since 2009, during the global financial crisis.
The International Monetary Fund chief, Christine Lagarde, told a French newspaper on Monday, meanwhile, that exiting the EU could cut Britain's gross domestic product by between 1.5 and 4.5 percentage points by 2019. Additionally, ratings agency S&P Global Ratings said both the euro zone's and the U.K.'s economic growth would take a knock as a result of the vote, with the agency warning that the U.K. would barely escape a "full-fledged recession caused by Brexit."
Among Asian bourses
Australia Market tumbles 1% as banks selloff
Australian share market finished steep lower on the back of unresolved election woes and as the Reserve Bank of Australia kept interest rates on hold at 1.75%. All sectors except utilities suffered selloff pressure with consumer staples, consumer discretionary, property trusts, and financials blue chip stocks being major losers. At close of trade, the benchmark S&P/ASX 200 index tumbled 53.80 points, or 1.02%, to 5228. The broader All Ordinaries shrank 52.40 points, or 0.98%, to 5312.80.
Shares of banks and financial companies declined on concerns over the possibility of a Royal Commission into the financial institutions. The selloff was compounded by the signs that lenders will need to further increase their capital buffers. On Monday, the Australian Prudential Regulation Authority told lenders that, despite being in the top quartile of most capitalised banks in the world, they will need to increase their capital ratios further in the wake of shifting international requirements. Commonwealth Bank of Australia tumbled 1.1% to A$72.56, Westpac Banking Corp 1.5% to A$28.54. ANZ Banking Group 1.5% to A$23.40, and National Australia Bank 1.6% to A$24.68.
Japan Market slides 0.67% on profit booking
The Japan share market declined for the first time in seven sessions in row, due to profit booking on recently outperforming stocks. Meanwhile selloff pressure mounted on caution ahead of important U.S. economic indicators scheduled to be released later this week, including June jobs data due out Friday, as well as the outcome of Japan's upper house election on Sunday. Total 24 out of 33 TSE sectors declined, with Fishery, Agriculture & Forestry, Machinery, Insurance, Banks, Mining, and Real Estate issues being major losers while Textiles & Apparels, Rubber Products, Construction, and Marine Transportation issues were notable gainers. The 225-issue Nikkei Stock Average dropped 106.47 points, or 0.67%, to 15669.33. The broader Topix index of all First Section issues on the Tokyo Stock Exchange was down 5.33 points, or 0.42%, to 1256.64.
Shares of Financials and export-oriented companies came under profit-taking. Among them were banking groups Mitsubishi UFJ and Sumitomo Mitsui and technology giants Sony and Hitachi. By contrast, several domestic demand-oriented issues were upbeat. They included beverage maker Kirin Holdings, retailer Seven & i Holdings, railway operator JR West and candy maker Morinaga & Co.
Fast Retailing dived 4.21%, although sales at its Uniqlo casual wear shops in June increased 4.5% from a year before on a same-store basis.
Shanghai Composite closes above 3K level
Mainland China stock market closed higher on Tuesday, 05 July 2016, bucking a slump across Asia, on cementing stimulus hopes. Chinese investors became more hopeful about President Xi Jinping's calls for overhauling state-owned enterprises after private survey showed that activity in China's services sector rose to an 11-month high in June, but a composite measure of activity fell to a four- month low. That raised fears the services sector may not be able to make up for a prolonged decline in the industrial economy that has pushed China's growth to 25-year lows. Total 9 out of 10 SSE sectoral indices advanced, with industrial issue being top gainer, followed by utilities, materials, consumer staples, and consumer discretionary issues being top gainers. The CSI300 index of the largest listed companies in Shanghai and Shenzhen grew 0.08%, to 3207.38, while the Shanghai Composite Index rose 0.6%, to 3006.39 points.
CHINA'S central bank said yesterday that it would use various policy tools to maintain appropriate liquidity and reasonable growth in credit and social financing. The People's Bank of China will continue with a prudent monetary policy and keep its stance neither too loose nor too tight, it said in a statement after the second-quarter monetary policy committee meeting. It said the central bank would improve the financing and credit structure, increase the proportion of direct financing and reduce social financing costs. The PBOC reaffirmed that it would keep the yuan exchange rate basically stable at a reasonable and balanced level while improving the exchange rate formation mechanism. The central bank said China's economic performance remained generally stable, but warned the complexity of the current situation should not be underestimated, underlining a modest recovery in the United States, a fragile recovery in Europe, financial market volatility after the Brexit vote, sluggish growth in Japan and difficulties facing emerging economies.
The Caixin China General Services Purchasing Managers' Index (PMI), an indicator of business activity in China's service sector, rose to an 11-month high of 52.7 in June. The reading, released on Tuesday after research by financial information service provider Markit sponsored by Caixin Media, was up from 51.2 in May and at its highest point since last July, when the index came in at 53.8. A reading above 50 indicates expansion, while a reading below 50 represents contraction. Service sector activity growth rebounded due to increased new work. The survey found new business orders rose to their highest level since last August. In terms of employment, service providers continued to adopt a cautious approach towards hiring staff, raising their workforce numbers only slightly for a third month in a row.
Hong Kong Stocks sink 1.46%
The Hong Kong stock market closed down, pressured by profit-taking, as worrying signs in China's service sector and as falls in major European stock markets overnight dampened investor sentiment. Trading was subdued with no directional clues from US markets, which were shut on Monday for the Independence Day holiday. The benchmark Hang Seng Index dropped 308.48 points, or 1.46%, to 20750.72 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, sank 159.04 points, or 1.81%, to 8643.31. Turnover decreased to HK$53.6 billion from HK$68.7 billion on Monday.
Standard Life Investments has suspended trading in its UK property fund as investors have asked to withdraw their money following the EU referendum. The UK pound slid to 1.3161/64 against USD in early European trading.
Morgan Stanley said in a research report that the opening of Shanghai Disney theme park has hurt Macau's gaming spending. It also expects number of tourists to shrink. Galaxy Entertainment (00027) sank 3.6% to HK$22.55. Sands China (01928) declined 3.6% o HK$25.5.
The UK pound's slump also pressured HSBC (00005), which dipped 1.7% to HK$47.35. Standard Chartered (02888) dropped 1.8% to HK$57.7.
SHKP (00016) bucked the downtrend, rising 0.8% to HK$97.55 after it donated a plot of land to a religious organisation for building multi-purpose service center. CK Property (01113) fell 2% to HK$49.4 despite S&P Global revised its rating outlook to stable.
China COSCO (01919) soared 2.6% to HK$2.81 as its parent company's acquisition of a Greek port has entered settlement stage. COSCO Pacific (01199) also edged up 0.4% to HK$7.75.
Indian Market slides on weak global cues
Auto stocks and index heavyweight Infosys led losses for key benchmark indices triggered by weak global cues. The barometer index, the S&P BSE Sensex, lost 111.89 points or 0.41% to settle at 27,166.87. The Nifty 50 index shed 34.75 points or 0.42% to settle at 8,335.95. Data showing deceleration in growth in India's services sector in June 2016 also weighed on sentiment, with the Sensex and the Nifty snapping a six-day winning streak.
Jaiprakash Associates rose a staggering 27.97% in a single trading session after the company's announcement that it has sold its cement plants spread across five states to UltraTech Cement for enterprise value of Rs 16189 crore. Engineering and construction major L&T eked out small gains after the company's announcement that its joint venture companies L&T-MHPS Boilers Private and L&T-MHPS Turbine Generators Private Limited have won export orders worth a combined $71.30 million. Shares of state-run coal mining giant Coal India gained after the company announced that a meeting of the board of directors of the company will be held on 11 July 2016 to consider a proposal of buyback of equity shares. Shares of IDBI Bank shrugged off reduction in lending rates based on marginal cost of funds. Ashok Leyland fell after a domestic brokerage reportedly downgraded the stock to 'sell', citing signs of demand moderation in commercial vehicles segment.
The outcome of a monthly survey showed that growth in India's services sector decelerated in June 2016 due to a softer expansion in new work. The Nikkei India Services Business Activity Index dropped to 50.3 in June 2016 from 51 in May 2016. Anecdotal evidence suggested that strong competitive pressures restricted new business gains. A faster increase in input costs contrasted with a slowdown in charge inflation. According to respondents, activity growth over the coming year is set to be supported by aggressive marketing campaigns. Some panellists expressed concerns regarding competitive pressures.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 rose 0.43% to 6970.99. South Korea's KOSPI index declined 0.3% to 1989.85. Taiwan's Taiex index slipped 0.5% to 8716.07. Malaysia's KLCI fell 0.3% to 1650.71. Singapore's Straits Times index slipped 0.21% to 2864.67.
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