Market Watch, December 17, 2009
Most Asian markets ended lower Thursday, with worries about a surge in supply of new shares and their impact on liquidity dragging Shanghai and Hong Kong lower.
China’s Shanghai Composite index dropped 2.3% and the Hang Seng Index declined 1.2% in Hong Kong, after the mainland’s securities regulator gave its approval for a number of initial public offerings over the last few days.
"The markets are concerned about liquidity outflows … it could be outflows after the [recent] initial public offerings," said Delta Asia Financial Group’s head of equity markets, Conita Hung.
China Shipbuilding Industry 601989, which made a weaker-than-expected debut Wednesday, slumped 6.6%, while China Citic Bank 601998CHBJF gave up 5.2% in Shanghai.
"Buying interest in banks at the market’s opening quickly fizzled out. In the absence of news, liquidity is the one thing investors are mulling," said Shen Yang, an analyst at Orient Securities.
In Hong Kong, shares of foot-wear maker Belle International Holdings 1880 slumped 7.2% after the company’s management staff sold more than 253 million shares in the company at a discount to the market price.
Elsewhere, Japan’s Nikkei 225 Average finished 0.1% lower at 10163.80, South Korea’s Kospi fell 1%, New Zealand’s NZX 50 slipped 0.3% and Taiwan’s Taiex shed 0.1%.
Australia’s S&P/ASX 200 rose 0.2%, led by wealth-management companies after National Australia Bank NABNABZY submitted a surprise 13.3 billion Australian dollar ($11.97 billion) bid for AXA Asia Pacific Holdings AXAAXAPY, trumping a bid from AMP Ltd. AMLTY and AXA SA. AXAHF for AXA Asia Pacific.
AXA Asia Pacific surged 12.7%. NAB shares slumped 4.7%. NAB’s bid "is a big positive for the Australian market because it shows that corporates are prepared to fight for assets," said IG Markets institutional dealer Chris Weston. "It encapsulates a positive view on the economy and the Australian wealth management sector." AMP shares rose 4.1%.
In afternoon trading, India’s Sensex fell 0.4% and Singapore’s Straits Times Index slipped 0.1%.
Dow Jones Industrial Average $INDU futures were down 45 points in screen trade. U.S. stocks ended mixed overnight after the U.S. Federal Reserve reiterated a commitment to low rates but nailed down the end dates of its special liquidity programs.
Cantor Fitzgerald’s chief Asia strategist, Uwe Parpart, wrote in a note to clients that the Bank of Japan, after its decision on interest rates Friday, was likely to reaffirm adding 10 trillion yen ($111 billion) in liquidity as decided in an emergency action last week. The "policy divergence" between the U.S. and Japan was likely to lead to a "gradual unwinding of exceptional yen strength," he said, adding that Japanese equities should cheer the yen’s weakness.
Exporters rose in early Tokyo trading after the U.S. dollar briefly rose above the key 90-yen level, although many of them pared gains or declined later, in line with the dollar’s retreat. Toyota Motor TM7203 and Canon CAJ7751 ended flat. Among commodity wwwucers, Sumitomo Metal Mining 5713STMNF gained 1.7% and Inpex 1605 added 3.6% after crude-oil and gold prices rose in New York.
In foreign-exchange markets, the euro fell as low as $1.4368. The currency’s weakness reflected waning risk appetite after Standard & Poor’s downgraded Greece’s sovereign rating Wednesday, raising concerns over Austria’s financial sector as well as year-end dollar demand, said Tokyo Forex & Ueda Harlow manager Yuzo Sakai.
There were also continued concerns over a European economic recovery and the ease with which European banks would be able to raise funds after Standard & Poor’s Wednesday put approximately 1.46 trillion euros of covered bonds from 98 issuance programs on CreditWatch negative or developing, after completing a review of its ratings methodology.
The euro was recently at $1.4396 from $1.4531 late in New York trade Wednesday, and at 129.11 yen from 130.45 yen. The U.S. dollar was at 89.71 yen after rising as high as 90.23 yen earlier in the day, from 89.78 yen Wednesday.
Japanese government bonds declined a little, with the lead March 10-year futures contract dropping 0.05 to 139.79, while the 10-year benchmark yield rose 0.5 basis points to 1.250%.
Spot gold was at $1,127.70 a troy ounce, down $9.80 from the New York close. January Nymex crude oil futures gave up 31 cents at $72.35 per barrel on Globex.