The Organization for Economic Cooperation and Development revised down growth forecast in its half yearly report for world growth to 2.7% for CY2013 and 3.6% for CY2014. In May, it had predicted 3.1% and 4% growth, respectively. The Paris-based research body attributed the weaker economic outlook to slowing growth in several large developing countries, as some economies are vulnerable to potential outflows when the U.S. Federal Reserve reduces its stimulus plan.
There were particularly sharp downgrades for Brazil and India though China's forecast was raised. Asia's largest economy escaped with only a mild reduction, as China's growth forecast for 2014 was cut to 8.2% from 8.4%.
The more pessimistic forecasts from OECD reinforced current thinking that gains in stock markets, fuelled by easy monetary policy, are out of step with the reality of lacklustre economic growth in rich developed nations and fading momentum in many developing economies.
Risk sentiments turned cautious ahead of October's FOMC minutes on Wednesday for further course of action. The Federal Reserve would releases minutes of its Oct. 29-30 policy meeting later in the global day that will be parsed for new insights into the central bank's thinking on the economy and the longevity of its low interest rate policies.
The US central bank currently buys bonds worth $85 billion a month in a bid to hold interest rates low and encourage economic growth in the world's biggest economy. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year.
Further, sentiments were also hammered after speech by Fed Chairman Ben Bernanke that revived fears about when the Fed will start to reduce its bond-buying program. Federal Reserve Chairman Ben S. Bernanke on Tuesday, 19 November 2013, said the central bank's main interest rate will probably remain near zero for a considerable time after asset purchases end. Bernanke said the Fed is committed to highly accommodative policies, echoing recent comments from other Fed officials including Janet Yellen, who has been nominated to succeed him. The labour market has shown meaningful improvement since the Fed's bond-buying program started, Bernanke said in remarks prepared for a speech to economists in Washington. A preponderance of data would be needed to begin removing accommodation, he said. Benchmark interest rates may remain low perhaps well after the jobless rate falls below the Fed's 6.5% threshold, he said.
Among Asia bourses, Japanese market drifted lower for third day in row, dragging the benchmark Nikei225 index 50.48 points down at 15076.08 amid caution before outcome of the Bank of Japan monetary policy meeting tomorrow and ahead of an announcement by a government-appointed advisory panel regarding risk asset allocations.
Many investors, particularly foreigners, are keen to see if the panel, which helps determine the stance of Japan's Government Pension Investment Fund, or GPIF, may propose an increase exposure to Japanese stocks.
The Japan Exchange Group announced two weeks ago the January launch of a new, 400-issue index focusing on companies with a high return on equity--a key investment theme for many foreign investors, and a possible tip-off to action by the GPIF, which manages over Y120 trillion in assets.
Shares of Japanese export related stocks fell for third day on profit taking, with Fanuc down 1% at 16,680 yen, Tokyo Electron down 1.3% at 5,240 yen, and Kyocera down 0.4% at 5,120 yen. Profit-taking was also seen among insurers, many of which reported earnings results on Tuesday. Dai-ichi Life lost 0.6% to 1,519 yen and Tokio Marine Holdings surrendered 1.7% to 3,370 yen. On the other hand, Sharp surged 7.6% to 299 yen after Mitsubishi UFJ Morgan Stanley Securities upgraded the LCD panel maker to Neutral from Underperform, citing improved first fiscal half earnings and a stronger balance sheet.
On the economic front, the Ministry of Economy, Trade and Industry stated on Wednesday that Japan's all industry activity index rose 0.4% month-on-month in September, after a 0.3% rise in August. Industrial production gained 1.3% on a monthly basis, recovering from a 0.9% drop in August. Construction output grew 1.4% and the indices of government services rose 0.4%. At the same time, the indicator for tertiary industry activity fell 0.2% month-on-month. On a year-on-year basis, the all industry activity index increased 2.2% in September following a 0.9% rise in the previous month.
The Ministry of Finance said that Japan's trade deficit almost doubled to 1.091 trillion yen in October 2013, compared with 556.2 billion yen deficit corresponding previous month. Japanese exports rose 18.6% YoY to 6.105 trillion yen while imports jumped 26.1% YoY to 7.2 trillion yen.
In Australia, the Australian financial market fell down, weighing the benchmark S&P/ASX 200 index down 0.84% to 5307.70, on catching the downbeat cues from moderate overnight losses on Wall Street, with the heavily weighted banks and miners led losses.
Shares of energy companies declined the most in Sydney in reaction to drop in crude oil prices in the international market. Brent Crude Prices fell as talks this week between world powers and Iran could lead to an easing of sanctions against the oil-rich country and on the back of Federal Reserve Bank of New York President William Dudley's speech on Monday at which he reignited taper worries. Brent found some support from the on-going political and social turmoil in Libya. Brent crude fell by US$1.55 to US$106.92 a barrel while US Nymex crude touched a four-month low, but closed up by US31c to US$93.34 a barrel. Among energy stocks, Woodside Petroleum fell by 1% to A$38.11, Santos 1.7% to A$8.35, Origin Energy 1.7% to A$14.05 and Oil Search 1% to A$8.35.
Materials and resources were also down despite firm finishing of the base metals at LME. Among miners, Australia's second biggest miner, Rio Tinto falling 0.7% to A$64.73 and the larger BHP Billiton shed 0.9% to A$37.55. Fortescue Metals dropped 1.5% to A$5.79.
Worley Parsons shares tanked 25.9% to A$16 after issuing the profit warning. WorleyParsons, a provider of engineering services to the energy and mining sectors, slashed its annual profit guidance on Wednesday after experiencing disappointing trading conditions in Australia and Canada. Underlying net profit, which smoothes out non-recurring items, in the year through June is now expected between A$260 million and A$300 million, compared to its previous guidance of a figure above the prior year's A$322 million profit.
In China, Chinese stock market closed modest higher after swinging between gains and losses, as financial reforms boosted risk appetite. The Shanghai Composite rose 13.49 points to 2206.61 while the CSI 300 Index added 0.53% to 2424.85.16.
Investment rationale for Chinese stocks was still buoyant because of Beijing's financial reforms plans, which were released at the end of last week. Last week, China promised to further open up its economy and support the orderly relaxation of service sectors to foreign investment including in finance, education, culture and medical industries. Liberalization of interest rates was also among the key reform proposals decided on at the Third Plenum. China is reforming its policies in an effort to bolster an economy that's heading for its weakest annual expansion since 1999.
Meanwhile sentiments were also bolstered after China's central bank governor said the yuan's trading band will be widened. The People's Bank of China will basically end normal intervention in the currency market and broaden the yuan's daily trading limit in an orderly way, Zhou wrote in an article in a guidebook explaining reforms outlined last week following a Communist Party meeting. Quotas under the Qualified Foreign Institutional Investor program will be expanded and then scrapped, he wrote.
Shares of Chinese financials companies continued upward journey on financial reform plans. China Construction Bank, the nation's second-biggest lender, rose 0.9% to 4.38 yuan. Haitong Securities, the second-largest listed brokerage, added 1% to 11.58 yuan.
On the economic front, China's foreign direct investment grew 1.24% from a year earlier to US$8.42 billion in October, the ninth month of growth, the Ministry of Commerce said on Tuesday. Although the pace slowed from September's 4.88% increase, it was still faster than August's gain of 0.62%. In the first 10 months, China's inbound foreign direct investment amounted to US$97 billion, up 5.77% on an annual basis. Foreign investment flowing into China's service sector jumped 13.93% year on year to US$40.8 billion in the first 10 months, while investment in manufacturing lost 5.25% and in agriculture it was down 2.61%.
In Hong Kong, shares in HK market finished slight higher after wavering in narrow range on caution ahead of October's FOMC minutes. Hong Kong's benchmark Hang Seng Index advanced 43.05 points to finish at 23700.86, while the Hang Seng China Enterprises Index added 71.99 points to 11437.44.
Among the HK 50 blue chips, 32 stocks rose and 15 fell, with three stocks remaining steady. Hong Kong Exchanges & Clearing gained 3% to HK$138.9, making itself the biggest blue-chip winner. Hengan International Group Co lost 2.4% to HK$96.15, making top blue-chip loser. China Mobile was down 0.5% to HK$82.05 as its October new adds slowed, while HSBC Holdings inched up 0.2% to HK$86.7.
Shares of Chinese dairy products makers climbed up following the comments from China government that birth ban will be eventually lifted. Yashili (01230) hit HK$5.5, up 8.1%. China Modern Diary (01117) gained 5.5% to HK$4.39. Huishan Dairy (06863) rose 3.3% to HK$3.17. Elsewhere, shipyards soared across the board. China Rongsheng (01101) shot up 20.8% to HK$1.16, while Guangzhou Shipyard (00317) jumped 12.7% to HK$17.24.
In Philippines, shares in the Philippine market drifted lower, with shares of typhoon-hit firms such as Energy Development Corp led losses. The Philippines main index traded down 2% at 6,140.52, the lowest since Sept. 16, adding to a 1.2% slide on Tuesday when foreign investors withdrew a net 118 million pesos ($2.7 million)
In Indonesia, shares in Indonesian market declined on profit booking. Jakarta's Composite Index was down 1.1% to 4350 points, weighed down by a 3% loss of shares of Telekomunikasi Indonesia. The stock gained more than 2% on Tuesday when the broader index rose to one-week closing high.
In India, Indian stocks dropped as sell-off gripped bourses in late trade on caution ahead of the release of the minutes from the US Federal Reserve's last meeting, possibly providing clues to the timing of its plan to slow monetary stimulus to the US economy. The barometer index, the S&P BSE Sensex, was provisionally down 305.69 points or 1.46%, off 310.17 points from the day's high and up 5.19 points from the day's low.
Among Indian blue chip stocks, Indian index heavyweight and cigarette major ITC edged lower in volatile trade. Dabur India fell after a block deal was struck on the counter on BSE today, 20 November 2013. Index heavyweight Reliance Industries (RIL) edged lower in choppy trade. Banking pivotals declined. Jet Airways (India) edged higher in choppy trade after the company's board approved issue and allotment of shares on preferential basis to Abu Dhabi based Etihad Airways, thereby giving Etihad 24% equity in the Indian private carrier. IT stocks dropped.
Elsewhere in the region, South Korea's KOSPI fell 0.71%. Taiwan's Taiex index shed 0.67%. Malaysia's KLSE Composite dropped 0.47%. Singapore's Straits Times index shed 0.25%.
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