Asia Pacific Market declined on Thursday, May 30, 2013, wiping out more than yesterday's gain, as risk adverse investors quickened to book profit amid concerns about global economic growth and uncertainty over the United States Federal Reserve's plans for unwinding its aggressive stimulus program.
The falls were partly due to the Organization for Economic Cooperation and Development (OECD) cutting growth forecasts for the global economy overnight. The OECD trimmed world economic growth forecast for 2013 to 3.1% before accelerating to 4% in 2014. The estimates marked a slightly more pessimistic view after in November the Paris-based think tank forecast global growth of 3.4% this year and 4.2% next year. Across OECD countries, GDP is projected to rise by 1.2% this year and by 2.3% in 2014, while growth in non-OECD countries will rise by 5.5% this year and 6.2% in 2014.
The United States was seen driving global growth with the world's biggest economy projected to expand 1.9% this year and then accelerating to 2.8% in 2014, which would be the country's best rate since 2005. In Japan, GDP is expected to grow by 1.6% in 2013 and 1.4% in 2014. In contrast, the euro zone was estimated to remain in recession for a second year. The OECD sees its economy contracting 0.6% in 2013 and then returning to growth next year with a rate of 1.1%. However, the outlook diverged widely within the 17-nation bloc with regional powerhouse Germany seen achieving growth of 0.4% and rebounding to a rate of 1.9% in 2014. The UK forecast was revised down to 0.8% growth this year and 1.5% in 2014.
The OECD slashed its forecast for China's 2013 economic growth to 7.8%, the same as last year's actual rate, from a previous 8.5%, citing weakening domestic demand amid global uncertainties. The OECD said India, Asia's third-largest economy, is likely to grow 5.3% in 2013, lower than the November forecast of 5.9%.
The OECD expects the Australian economy to grow by just 2.6% in 2013. Just six months ago, it expected 3% growth, and six months before that 3.7%. The global organization based in Paris said the persistently high Australian dollar was part of the reason for the cut in forecasts.
Investment energy in the markets were also curbed by concerns the US Fed's might start scaling back its bond-buying program earlier than initial planned due to positive sign of the US economic growth. Sharp rises in global stock markets this year have been partly fueled by central bank actions to keep interest rates super low to support economic recovery in the US, Europe and Japan. Meanwhile, an improving U.S. economy increases the chance that the Fed might ease back on its massive bond-buying program, known as quantitative easing. The purchase of $85 billion a month in Treasury bonds has helped keep interest rates down and been a boon to stock markets, where investors have fled in search of higher returns.
In the Asia Pacific region, Japanese stock market was worst performer in the region, as risk adverse investors quickened to book profit amid concerns about global economic growth and amid concerns about market volatility as the dollar slid closer toward the 100-yen level. The Nikkei Stock Average was down 737.43 points to end the day at 13,589.03, while the broader Topix index shrank 44.45 points to 1134.42.
The Nikkei Stock Average suffered its worst fall since last Thursday's 7.3% plunge, and put the index deep into correction territory- defined as a market pullback of at least 10%. From its 2013 intraday peak on May 23 through today's close, the benchmark has now surrendered over 14%.
The dollar's depreciation to the 100 yen level triggered massive selloff to the exporters' shares. Meanwhile, risk aversion selloff were also seen in shares of property companies, storage and transportation-related companies, financial companies, power companies and gas companies.
In Australia, Australian shares ended dived deep lower, wiping out almost all gains made in prior two sessions, with blue chips of materials, realty, financials, retailers and consumer goods companies lead retreat. The selloff in the local stocks triggered after the Bureau of Statistics' quarterly investment report stated that capital investment by Australian businesses fell by 4.7% between January and March, making it the biggest fall in 3.5 years. The benchmark S&P/ASX200 index dropped 44 points, or 0.88%, to 4,930.70, while All Ordinaries Index lost 42.10 points, or 0.85%, to 4,917.10.
In China, Chinese share market closed quiet session slight lower, registering first fall in five straight sessions, with blue chips of telecom, tech, materials and financials blue chips companies led decline. The benchmark Shanghai Composite Index was last quoted at 2317.75, down by 6.27 points or 0.27% from prior day closure. Stocks moved in tight range throughout the day amid concerns over China's economic outlook and tight liquidity at the end of May. The Organization for Economic Cooperation and Development (OECD) yesterday joined the International Monetary Fund to lower its 2013 China growth forecast to 7.8%, down from an earlier estimate of 8.5%, due to weak demand and uncertainties in the global economy. The IMF yesterday slashed its prediction for China's 2013 economic growth to 7.75% from 8%, citing weaker global demand. The seven-day repurchase rate, a gauge of interbank funding availability, spiked above 5% in Shanghai as banks are gathering cash to meet month-end requirements.
In Hong Kong, HK shares declined in volatile trade with the benchmark Hang Seng Index down by 0.3% at 22484.31 amid concerns over China's and world economic outlook and due to the future contract settlement date.
Hong Kong's value of total retail sales in April, provisionally estimated at HK$43.1 billion, rose 20.7% over a year earlier, data from the Census and Statistics Department showed. After netting out the effect of price changes over the same period, the volume of total retail sales was up 19.4% in April compared with a year earlier.
In India, the Indian share market closed volatile trading edge above the neutral line a day ahead of crucial Jan-March GDP data release, led by gains in auto stocks, such as Tata Motors and Mahindra and Mahindra after reporting better-than-expected quarterly earnings. The Sensex provisionally gained 67.76 points or 0.34% to 20215.40.
Elsewhere, Indonesia's Jakarta Composite fell 1.4%, New Zealand's NZX50 fell 0.4%, Taiwan's TAIEX lost 1.1%, South Korea's KOSPI Composite edged down 0.05%, Malaysia's KLSE Composite shed 0.5% and Singapore's Strait Times index fell 0.9%.
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