Asia Pacific Market: Stocks dive further deeper into sea of red

Asia Pacific share market declined further deeper into sea of red on Wednesday, 02 September 2015, on persistent concerns over China's economic slowdown and prospect of a Federal Reserve rate increase this month.

The regional market began the day in negative territory, with a broad sell-down echoing an overnight slump in U.S. stocks as renewed worries about a slowdown in China's economy. Meanwhile, risk sentiments weakened further on prospect of a Federal Reserve rate increase this month.

The Dow Jones Industrial Average plunged 470 points, or 2.8%, and is 12.5% below the all-time high it set in May. The S&P 500 fell 3% and is once again in a so-called correction. The tech-heavy Nasdaq sank nearly 3% as well and is 11% below its July peak.

The performance of China's manufacturing and services firms weakened in August, with activity in state-owned industrial companies contracting for the first time in six months and that in private manufacturers falling to a 76-month low, according to surveys released yesterday. The official Purchasing Managers' Index, a comprehensive gauge of operating conditions in large state-owned industrial companies, landed at 49.7 last month, down from 50 in July and 50.2 in June, according to the National Bureau of Statistics and the China Federation of Logistics and Purchasing. A reading above 50 is expansion, and below it contraction. The latest figure was the first contraction since February after marginal growth in the past six months. The Caixin China Manufacturing Purchasing Managers' Index, a similar indicator slanted toward private and export-oriented companies, landed at 47.3 for August, down from July's 47.8 and the worst since March 2009. The figure has been below 50 for the sixth straight month after a brief rebound in February.

China's service firms also reported less vibrant activities. The official non-manufacturing PMI retreated to 53.4 in August from July's 53.9, while the Caixin Services Business Activity Index posted 51.5 in August, down from 53.8 in July and signaled the slowest increase in the current 13-month sequence of expansion.

Investors were cautiously awaiting for Friday's release of U.S. non-farm payrolls data for signal whether or not the U.S. Federal Reserve may raise interest rates in September. Bets on a September U.S. interest-rate increase climbed after Federal Reserve Vice Chairman Stanley Fischer said over the weekend there is good reason to believe inflation will accelerate and that the Fed should not wait until it hits its inflation goal to act. Investor attention will focus this week on the U.S. August jobs report, due Friday, as the last major data point before the Fed's meeting on Sept. 16-17.

Among Asian bourses

Nikkei falls for straight third day

The Japanese share market finished down for third straight session after swinging between gains and losses. Investors were mostly bearish on risk assets due to yen appreciation against major currencies, concerns about China economic growth slowdown and prospect of a Federal Reserve rate increase this month. Total 29 out of 33 TSE sectors ended down, with shares of pulp & paper, mining, oil & coal products, Iron & steel, nonferrous metals, and marine transportation issues being major drag on the market. The Nikkei Stock Average ended lower by 70.29 points, or 0.4%, to end at 18095.40 points, following a 1.3% loss on Monday. The broader Topix index ended down 0.82%, or 12.12 points, to 1465.99 at the close in Tokyo.

Shares of paper makers ended lower, dragged down by Daio Paper, down 18%, after saying it would sell 30 billion yen of convertible bonds in Japan.

Oil explorers and producers posted losses after oil prices extended overnight losses during Asian trading. Inpex sank 3.6%, while Japan Drilling Co. lost 1.8%.

Shares of land transportation companies ended higher, led by Hankyu Hanshin, up 5.9%, after Barclays boosted its investment rating on the rail stock to overweight from equalweight.

Drugmakers were mostly up, led by Tsumura, up 9%, after Credit Suisse Group AG raised its target price on Tsumura shares and upgraded the stock to outperform from neutral.

Australia market ends higher as banks, miners rebound

The Australian share market closed slightly higher after recouping early losses as a recovery in China stocks and a GDP-inspired boost to rate cut hopes buoyed investors. The rebound was driven by the big banks and miners. But gains were limited as investors eyeing on the ABS releases data on retail spending as well the trade (exports and imports) data for July tomorrow before taking further risk. The benchmark S&P/ASX 200 index advanced 5.10 points, or 0.1%, to 5101.50 points. The broader All Ordinaries index closed 2.30 points, or 0.04%, up at 5119.40.

Aussie market declined in early trade on tracking weak lead from offshore markets. The selloff in early trade was also fuelled by reports that Australia's sovereign wealth fund, the Future Fund, has shifted more of its assets into cash as it fears rising investment risks that won't be matched by higher returns. In a portfolio update released on Wednesday, the fund showed it had moved an extra A$5 billion into cash since its March update to make it more than 20% of the total portfolio. The cash balance has more than doubled since September last year, when the Future Fund held A$10 billion. The Future Fund delivered a strong 15.4% return for the financial year to June 30, adding A$15.6 billion to investment returns that have increased the fund's size to A$117.2 billion. But the Aussie market recovered lost ground after a GDP print of 0.2% for the three months to June, against forecasts of 0.4%, lifted hopes for further interest rate cuts by Reserve Bank of Australia.

Banks stocks recovered on bottom fishing after heavy losses in previous sessions. The banks have been hard hit in recent months as investors have fretted about regulatory calls to hold additional capital and a rise in bad debts as the wider economy cools. Australia & New Zealand Banking Group led gains among major banks, up 1.3% to A$27.42, meanwhile National Australia Bank rose 1% to A$30.70, Westpac Bank added 0.7% to A$30.42, and Commonwealth Bank grew 0.5% to A$73.63.

China stocks decline further

Mainland China's stock market closed marginally down after trimming early losses on Wednesday, 02 September 2015. Selloff momentum continued in Mainland market on deepening gloom over the domestic economic growth after performance of China's manufacturing and services firms weakened in August. The Shanghai Composite Index fell more than 4% on opening. It later recovered into positive territory, but fell back again to close 0.2% down at 3,160.17. The Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 2%, or 33.83 points, to 1673.95. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, lost 1.82%, or 34.46 points, to close at 1855.03.

Investors largely ignored fresh measures unveiled by the government to support economic growth. China on Wednesday again unveiled measures aimed at boosting its economy, as falling export demand and other factors fuel predictions that its GDP growth could fall well below its target of about 7% in the third quarter. State media said Wednesday that the government would set up a national fund worth more than $9 billion, to help small and micro-businesses. The authorities have also lowered the threshold on the capital requirement for some fixed-asset investment projects -- including the construction of airports, railways, subways, highways and ports -- in an attempt to stimulate construction. The move followed reports that China's fixed-asset investment growth slipped sharply in July to 11.2% -- its lowest rate in a decade, and significantly lower than the government's 15% target for the year.

State media also said that 50 of the country's biggest brokerages would each contribute 20% of their assets to the market stabilization fund, following speculation that the authorities were rolling back efforts to stop the market from falling too far.

Hong Kong market sinks

Hong Kong stock market ended lower, on persistent concerns over China's economic slowdown. Uncertainty over the timing of a U.S. Federal Reserve rate increase also fuelled risk aversion selloff. The Hang Seng Index ended down by 250.49 points, or 1.18%, at 20934.94 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, sank 152.79 points, or 1.62%, to 9301.32 points. Turnover increased to HK$96.05 billion from HK$85.8 billion on Tuesday.

Sensex, Nifty hit lowest closing level in more than a year

Shares of state-run power and coal sector firms and banking stocks led losses for key benchmark indices as the government's decision not to levy minimum alternative tax (MAT) on stock market transactions of foreign institutional investors (FIIs) failed to buoy sentiment on the bourses. The barometer index, the S&P BSE Sensex, lost 242.88 points or 0.95% to settle at 25,453.56. The 50-unit CNX Nifty lost 68.85 points or 0.88% to settle at 7,717. The Sensex and Nifty, both, hit their lowest closing level in more than a year.

Bank stocks edged lower after the Reserve Bank of India issued draft guidelines on computation of banks' base rate based on marginal cost of funds. Among PSU banks, Union Bank of India (down 5.43%), Punjab National Bank (down 3.82%), State Bank of India (down 3.55%), Canara Bank (down 2.85%), Bank of India (down 2.71%), Bank of Baroda (down 1.74%), Andhra Bank (down 1.71%), IDBI Bank (down 0.96%), Syndicate Bank (down 0.86%) and United Bank of India (down 0.7%) edged lower. Corporation Bank (up 1.16%) and Central Bank of India (up 0.3%) edged higher.

Shares of oil exploration & production firms were mixed after the government announced competitive bidding for small oil fields surrendered by ONGC and Oil India. Reliance Industries (up 1.09%) and Oil India (up 0.52%) edged higher. Cairn India (down 2.98%) and ONGC (down 3.55%) edged lower.

Elsewhere in the Asia Pacific region: Taiwan's Taiex index rose 0.2% to 8035.29. South Korea's KOPSI rose 0.1% to 1915.22. New Zealand's NZX50 fell 1.2% to 5590.19. Singapore's Straits Times index fell 0.2% at 2878.13. Indonesia's Jakarta Composite index fell 0.3% to 4401.29 Malaysia's KLCI slipped 1.2% to 1590.19.

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