Asia Pacific share market advanced on Thursday, August 4, 2016, on tracking an overnight rally in Wall Street and global crude oil prices. Meanwhile, risk sentiments were also encouraged by speculation that the Bank of England to cut interest rates to a record low.
Wednesday was the first positive day for US equities after a series of loss sessions. US shares gained on the rise in oil prices, and Asian investors factored those in. Crude oil prices rose more than 3% in the previous session after a larger-than-expected gasoline draw eased concerns about global supply glut.
Oil prices rebounded more than 3% overnight, following a larger-than-expected drawdown on the U.S. gasoline stockpile. Gasoline inventory fell by 3.3 million barrels versus a forecast for a 200,000-barrel drop. The drawdown appeared to have offset data from the Energy Information Administration, which showed a 1.4 million barrels uptick in U.S. crude inventories last week.
Investor sentiment was also upbeat on expectations that the Bank of England would cut interest rates to a record low of 0.25% later in the day to a record low of 0.25%, to ward off a potential recession following the UK's vote to leave the European Union. If the BoE cuts its bank rate to the lowest level in its 322-year history, it will join the Bank of Japan and the Reserve Bank of Australia, which undertook unprecedented stimulus in the past week. Global central banks are trying to address the possible impact of global economic slowdown following the Brexit vote.
Among Asian bourses
Japan Market rises 1.1% on buybacks, halt in yen appreciation
The Japan share market closed higher in volatile trade, on the back of strength in export-oriented and resources-related issues thanks to pause in the yen's rise against the dollar. Speculation that the Bank of Japan was buying exchange-traded funds Thursday afternoon also brightened investor sentiment. The 225-issue Nikkei average rose 171.78 points, or 1.07%, to close at 16,254.89 on the Tokyo Stock Exchange after taking a plunge of 308.34 points on Wednesday. The Topix index of all first-section issues gained 11.01 points, or 0.87%, to close at 1,282.99, after losing 28.22 points the previous day.
Fast Retailing jumped 2.78% after sales at its Uniqlo chain in July surged 18.1% from a year ago, up for the fourth straight month. Nonferrous metals producer Sumitomo Metal Mining and rival Mitsubishi Materials drew buybacks along with oil developer Inpex.
Toyota Motor shares closed up 1.83%. Japanese automaker Toyota reported earnings after the market closed on Thursday. Fiscal first-quarter profits fell by 15% to 642.23 billion yen ($6.33 billion), according to the car maker, with a stronger yen weighing on profits. For the full fiscal year 2017, Toyota expects profits to fall by 43.9% on-year to 1.6 trillion yen.
On the other hand, Olympus tumbled 4.26% to rewrite its year-to-date low, a day after the optical equipment maker revised its full-year earnings projection downward. Among other losers were mobile carriers SoftBank and KDDI, and daily goods manufacturer Kao and general contractor Taisei.
Australia ASX200 recovers 0.18%
Australian share market finished the session higher, on the back of strength in energy stocks. Meanwhile, buying pressure was also evident among realty, consumer staples and consumer discretionary stocks after ABS data revealed retail spending growth is at its slowest pace in three years. At close of trade, the benchmark S&P/ASX 200 index rose 10.10 points, or 0.18%, to 5475.80. The broader All Ordinaries inclined 12 points, or 0.22%, to 5563.40.
The banks and financial stocks ended mixed after a dismal session yesterday. ANZ Banking Group fell 0.1% to A$25.20 and Commonwealth Bank of Australia shed 0.5% to A$75.66, while Westpac Banking Corp added 0.2% to A$30.11 and National Australia Bank rose 0.2% to A$25.90. Suncorp Group has slipped 2.1% after it posted an 8% fall in annual profit.
Energy stocks were leading the charge of ASX rally after a 4% bounce in oil prices pushed US stocks higher overnight. Woodside Petroleum advanced 0.7% to A$26.63 and Origin Energy grew 2.4% to A$5.46. Santos inclined by 6.7% to A$4.59 and Oil Search added 1.5% to A$7.27.
Materials stocks were mostly down, with Rio Tinto falling 1.6% to A$48.62 after posting its weakest profit since 2004 after market close yesterday. Fortescue Metals erased 2% to A$4.32, while BHP Billiton added 1.2% to A$19.31.
China Stocks up 0.24%
Mainland China stock market closed higher for third day in row, as the People's Bank of China reiterated that it will continue with its prudent monetary policy and keep the yuan exchange rate stable at a reasonable and balanced level. Market sentiments were also encouraged by government pledge of development of advanced industries, including green energy and intelligent manufacturing while continuing SOE reform and cutting excess capacity. The CSI300 index of the largest listed companies in Shanghai and Shenzhen gained 0.24%, to 3201.29, while the Shanghai Composite Index inclined 0.13%, to 2982.43 points and the Shenzhen Composite index closed 0.73% higher at 1948.91 points.
China's central bank said late on Wednesday that the government would use multiple monetary policy tools and maintain ample liquidity and reasonable credit growth in the second half of the year. On the same day, the National Development and Reform Commission (NDRC), China's state planner, said the country will find an appropriate time to cut interest rates and reserve requirement ratios (RRR), and will reduce companies' funding and other costs. But the reference to rate and RRR cuts were later deleted by NDRC, a move interpreted by some as showing policy rifts among various government bodies.
CHINA Vanke shares locked 10% upper circuit at 19.67 yuan after the country's largest listed property developer said on Wednesday that its sales rose 14.4% year on year to 27.4 billion yuan (US$4.1 billion) in July. The developer said floor space sold reached 2.08 million square meters last month. Sales exceeded 217.5 billion yuan during the first seven months, up 62.6% year on year.
Hong Kong Stocks bounce on bottom fishing
The Hong Kong stock market ended higher, as investors chased for bottom fishing on following a positive lead from Wall Street overnight and as oil prices extended gains in Asia on mixed US data. The benchmark Hang Seng Index inclined 93.11 points, or 0.43%, to 21832.23 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, rose 26.29 points, or 0.29%, to 9004.52. Turnover decreased to HK$53.6 billion from HK$70 billion on Wednesday.
HSBC gained 2.7% after announcing a $2.5 billion share buyback in London bourse while keeping its dividend at the current level for the foreseeable future.
Energy stocks rallied as U.S. oil traded around $41 a barrel. Both Sinopec (00386) and PetroChina (00857) edged up 0.4% to HK$5.52 and HK$5.23. Cnooc jumped 3.1% to HK$9.12 after the company ended a dispute over gas prices with Husky Energy Inc.
Evergrande (03333) shot up 5% to HK$5.15 after the developer announced that its July contracted sales rose 205% to Rmb43 billion. Meanwhile, there were reports saying that Evergrande has built up its stake in China Vanke (02202) to 2%. China Vanke ended up 3% to HK$18.6.
Indian Market ekes out minuscule gains
Indian benchmark indices eked out minuscule gains in a volatile trading session. The barometer index, the S&P BSE Sensex rose 16.86 points or 0.06% to settle at 27,714.37. The Nifty 50 index rose 6.25 points or 0.07% to settle at 8,551.10.
Stocks of public sector banks edged higher. Stocks of private sector banks edged lower. Metal and mining stocks gained. Auto stocks rose on expectations that auto manufacturers may benefit from the Goods and Services Tax constitutional amendment bill passed by the Rajya Sabha yesterday, 3 August 2016.
Power Grid Corporation of India (PGCIL) edged higher after a bulk deal was executed on BSE. Dr Reddy's Laboratories (DRL) rose after the company announced that it has successfully completed the previously announced acquisition of 8 Abbreviated New Drug Applications in the US. Bata India edged lower after the company reported weak Q1 June 2016 results.
The Rajya Sabha yesterday, 3 August 2016 passed the Goods and Services Tax (GST) constitutional amendment bill which the Lok Sabha had already approved last year. With the Rajya Sabha clearing the constitution amendment bill for introduction of the GST, the amended GST bill once again will have to be ratified by the Lok Sabha. Once amendments to the bill are passed in the Lok Sabha it will later go to the state assemblies for clearance. Atleast 50% of the states must approve the legislation.
A key task for the proposed GST Council now will be determining the rate of taxation. A decision on the tax rate will have to be ratified by a three-fourth majority of the centre and the states. As per the proposed legislation, the centre will have one-third weightage on its vote and states will have two-third weightage. In its report submitted to the government last December, a panel headed by Chief Economic Adviser Arvind Subramanian had recommended a revenue-neutral rate (RNR) of GST of 15-15.5%, with a standard rate of 17-18% that is to be levied on most goods and all services.
The main objective of the GST is to eliminate excessive taxation. GST is a uniform indirect tax levied on goods and services across a country. The measure would harmonize 11 state and central levies into a national sales tax, reducing business transaction costs.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 added 0.3% to 7298.08. South Korea's KOSPI index climbed 0.3% to 2000.03. Taiwan's Taiex index grew 0.26% to 9024.71. Malaysia's KLCI was up 0.4% to 1655.29. Indonesia's Jakarta Composite index added 0.4% to 5373.86. Singapore's Straits Times index added 0.15% to 2832.96.
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