Asia Pacific Market: Stocks fall on Ukraine crisis, China factory data

Asia Pacific Market closed mostly lower on Monday, 03 March 2014, the first trading session of the week and of month, as investors dumped risker positions and flew toward safe heaven assets, amidst escalating geopolitical tension over Ukraine and after an official gauge of Chinese manufacturing dropped to an eight-month low. The MSCI Asia Pacific Index slid 0.7% to 136.85.

Regional markets saw heavy selling pressure today as risk aversion selloff amidst growing fears of a conflict between Russia and Ukraine after Moscow's decision to send troops into the former Soviet republic was blasted by world leaders as a clear violation of its sovereignty. Selloff pressure mounted further after an official gauge of Chinese manufacturing dropped to an eight-month low.

Geopolitical tensions have spiked after Russia's parliament voted Saturday to allow President Vladimir Putin to send troops into Crimea, a predominantly Russian-speaking peninsula in the southeast of Ukraine.

The leaders of the world's top industrialised powersBritain, Canada, France, Germany, Italy, Japan, and the United Statesturned on fellow G8 member Russia Sunday, condemning its clear violation of Ukraine's sovereignty. Symbolically billing themselves as the G7, they warned in a statement that Russia's actions were incompatible with the Group of Eight Nations, which Moscow joined in 1997. They also said they would not take part in preparatory talks for June's G8 summit in Sochi, Russia.

China's official purchasing managers index (PMI) for the manufacturing sector has dropped to 50.2% in February from 50.5% in January, according to a statement jointly released by the National Bureau of Statistics (NBS) and the China Federation of Logistics and Purchasing (CFLP). A PMI reading above 50 indicates expanding activity while one below that level points to a contraction. The new orders sub-index in the official PMI China fell to 8-month low of 50.5 in February from 50.9 in January and the sub-index for export orders fell to 48.2 last month, also 8-month low, from 49.3 in January. The official non-manufacturing Purchasing Managers' Index (PMI) rose to a three-month high of 55.0 in February.

The final Markit/HSBC manufacturing Purchasing Managers' Index posted at 48.5 in February, up fractionally from the earlier flash reading of 48.3, but down from 49.5 in January, its third straight decline. This signalled a moderate deterioration in the health of the Chinese manufacturing sector.

Among Asian markets, Japan's stock market has started the new trading month in the red, as yen hardening against major currencies and intensifying geopolitical situation in Ukraine has rattled investors sentiments. The benchmark Nikkei-225 index lost 1.27% to finish at 14652.23, while the Topix index of all first-section shares lost 1.23% to 1196.76.

Exporters and other asset plays that were sensitive to dollar movements declined the most as a weaker U.S. currency hurts the ability of large manufacturers to cut prices on goods they sell overseas. In forex markets, the dollar weakened to 101.46 yen, from 101.76 yen in New York Friday afternoon.

Among exporters, Canon Inc declined 2% to 3100 yen, Sony Corp shed 1.1% to 1760 yen, FANUC Corp dived 2.7% to 14175 yen and Toyota Motor Corp lost 1.1% to 5773 yen. Device maker Olympus lost 3.0%, while Mazda Motor, which has no overseas factories to offset the higher yen impact on sales, fell 3.5%.

In Australia, shares of the Australian market declined, weighing the benchmark S&P/ASX 200 index down 0.38% to finish at 5384.30, as risk aversion selloff inspired by developments in the Ukraine and disappointing February's readings on China's manufacturing activities.

Shares of materials and resources were biggest drag on the Sydney market, hit by rating downgrade from brokerage houses. Citi group has downgraded its expectations the earnings of BHP Billiton and Rio Tinto this year due to plunge in the price of iron ore. Citi has forecasted iron ore to slip $7 to $113 a tonne this year, sliding to $90 in 2015 and $80 in 2016, before having a modest rebound. The investment bank has joined Goldman Sachs in tipping the price of iron ore - Australia's most lucrative export - to crash to $US80 a tonne within the next two years.

Citi analysts led by Clarke Wilkins downgraded their recommendations for BHP and Rio from buy to neutral, with share price targets falling from $39 to $38 and $80 to $74 respectively. Mr Wilkins forecast a 9% fade in Rio's earnings from 2014 to 2016, saying the lower iron ore prices would offset increased production and cost cuts. Fortescue Metals was also downgraded to neutral, with Citi's price target for the stock falling from $6.70 to $5.90. Meanwhile, Atlas was downgraded to sell while the same recommendation was maintained for Mt Gibson.

Among miners, Rio Tinto Rio Tinto was down 1.6% to A$65.79 and BHP Billiton fell 2.6% to A$37.40. Fortescue Metal dropped 1.7% to A$5.35.

Shares of gold miners spurted sharply, as the situation in Ukraine lifted prices for bullion metal. Bullion for immediate delivery jumped as much as 1.8% to $1,350.37 an ounce. Newcrest Mining (NCM) has gained 5.7% to A$11.99 and Perseus Mining added 9.3% to A$0.47.

The new home sales in Australia edged up in January after slipping in December, according to the Housing Industry Association. The volume of new home sales rose by 0.5% in the month, with sales of new-detached houses increasing by 0.3% and multi-unit sales rising by 1.6%. New home sales soared by 17% compared with the same month last year. New private detached house sales lifted by 10.9% in Victoria and 0.4% in Queensland in January, with drops of 6.9% in South Australia, 6.4% in New South Wales and 1.9% in Western Australia.

In China, Mainland China stock market finished higher for fourth session in row, lifted by growing speculation about economic-reform measures from lawmakers during an annual policy meeting this week after an official gauge of Chinese manufacturing dropped to an eight-month low. The benchmark Shanghai Composite Index rose 0.9% to 2,075.24 at the close, the most since Feb. 19.

Policy makers will meet at the National People's Congress meeting in Beijing on March 3. Market pundits are whispering that policy makers likely to be discuss on topics covering state-owned enterprises, financial industry deregulation, environmental protection, free-trade zones, pension rules, steps to fix local-government finances, charge market prices for natural resources, rein in shadow-banking risks and open up state businesses to private investment. Investors were speculating that policy makers will announce an economic growth target, as declining gauges of manufacturing add to signs the nation's expansion is slowing.

Shares of telecom companies climbed the most in the Shanghai today, led by China United, which controls the nation's second-largest mobile phone operator, ending 6.5% higher to 3.26 yuan. ZTE Corp, the second-biggest phone-equipment maker, advanced 2.4% to 13.46 yuan.

Shanghai Friendship Group surged to 9.49 yuan, leading gains by companies on the consumer-staple measure. Shanghai Pharmaceuticals Holding Co. gained 5.1% to 14.55 yuan. Zhejiang Dahua climbed 3.6% to 31.30 yuan. Hangzhou Hikvision added 4.1% to 22.90 yuan. Netposa Technologies advanced 8% to 114.20 yuan.

In Hong Kong, shares in the city's market fell down on escalating geopolitical tensions as Ukraine mobilised for war after Russia bloodlessly seized Crimea and as drop in Chinese manufacturing to an eight-month low. The benchmark Hang Seng index tanked 336.29 points from prior day to finish at 22500.67.

Among the HK 50 blue chips, six rose and 43 fell, with one stock remaining steady. Market heavyweights were weaker. Tencent (00700) dipped 3.3% to HK$602. HSBC (00005) fell 1.5% to HK$81.05. China Mobile (00941) edged down 0.1% to HK$73.65.

Lenovo shares rose 1.2% to HK$8.38 after its chairman Yang Yuanqing said the company could turn around the business of Motorola Mobility in 4-6 quarters.

Sun Hung Kai Properties Ltd., Hong Kong's second-largest developer, dropped 2.8% to HK$96.55 after saying it may raise as much as HK$22.2 billion ($2.9 billion) from issuing convertible warrants.

Sun Art Retail Group Ltd. climbed 7% to HK$9.44 after China's largest hypermarket operator posted a 15% gain in full-year profit

The Census and Statistics Department said on Monday that Hong Kong's value of total retail sales in January, provisionally estimated at HK$54.6 billion, rose 14.5% over a year earlier. The revised estimate of the value of total retail sales in December 2013 grew 5.7% over the same period a year earlier.

In India, Indian stock market closed lower on the first trading session of the week as stocks fell across the world on geopolitical worries over Ukraine and as a measure of Chinese manufacturing slipped. Gains in crude oil prices also weighed on the sentiment on the domestic bourses. India imports two-thirds of its oil consumption. Increase in oil prices raised fears of increase in current account deficit and increase in the government's fiscal deficit. As per provisional figures, the S&P BSE Sensex was down 188.76 points or 0.89% to 20,931.36.

Among the 30 Sensex shares, 28 declined and only four stocks rose. Dr. Reddy's Laboratories (down 3.21%), Bhel (down 2.81%), and Sun Pharmaceutical Industries (down 2.75%), edged lower from the Sensex pack.

TVS Motor Company rose 2.27% to Rs 87.85 after the company said its total sales rose 7% to 1.77 lakh units in February 2014 over February 2013. TVS Motor Company (TVS)'s total exports surged 31% to 28,782 units in February 2014 over February 2013. Two wheeler exports registered a growth of 26% to 22,713 units in February 2014 over February 2013. Total two wheeler sales rose 6% to 1.70 lakh units in February 2014 over February 2013. Domestic two wheeler sales increased 3% to 1.47 lakh units in February 2014 over February 2013. Scooters sales grew by 37% to 41,990 units in February 2014 over February 2013. Motorcycles sales grew by 3% to 62,762 units in February 2014 over February 2013. Three wheeler sales jumped 53% to 7,369 units in February 2014 over February 2013.

Shares of public sector oil marketing companies (PSU OMCs) jumped after hiking petrol, diesel and jet fuel prices. HPCL (up 1.46%) and Indian Oil Corporation (up 0.77%) gained. BPCL was flat at Rs 377.65. PSU OMCs on Friday, 28 February 2014, hiked the price of petrol by 60 paise and diesel by 50 paise per litre effective Friday midnight amid rising crude oil prices and depreciation of rupee against the dollar. This price hike is exclusive of local taxes. PSU OMCs also hiked the price of jet fuel or aviation turbine fuel by 1% effective 1 March 2014.

The Indian manufacturing economy showed signs of strengthening in February, with faster increases in output and new orders bolstering the PMI to reach a one-year peak. New export business also rose at a quicker clip, Markit Economics said. Up from 51.4 in the previous month to 52.5 in February, the headline HSBC India Purchasing Managers' Index (PMI) signalled a solid and stronger improvement in business conditions across the country's goods-producing sector, Markit Economics said.

The Central Statistics Office (CSO) stated after market hours on Friday, 28 February 2014, that the Quarterly GDP at factor cost at constant (2004-05) prices for Q3 of 2013-14 is estimated at Rs 14.8 lakh crore, as against Rs 14.1 lakh crore in Q3 of 2012-13, showing a growth rate of 4.7% over the corresponding quarter of previous year. As per the revision policy, quarterly estimates and growth rates of 2011-12 and 2012-13 have undergone revision on account of revision in annual estimates of 2011-12 and 2012-13. However, the growth rates of Q1 and Q2 estimates of 2013-14 have not been revised and would undergo revision only at the time of the release of fourth quarter estimates and Provisional estimates for the year 2013-14 to be released on 31 May 2014. Therefore, Q1 and Q2 GDP estimates given in this release are based on Provisional estimates of 2012-13 released in May 2013, while the Q3 estimates are based on the First Revised estimates of 2013-14 released in January 2014. The core sector registered a growth of 1.6% in January 2014, data released by the government after trading hours on Friday, 28 February 2014, showed. The eight core industries have a combined weight of 37.90% in the Index of Industrial Production (IIP).

Elsewhere in the Asia Pacific region, South Korea's KOSPI index fell 0.77%. Taiwan's Taiex index dropped 0.44%. Indonesia's Jakarta Composite Index sank 0.78%. Malaysia's KLSE Composite fell 0.6%. Singapore's Straits Times index shed 0.75%. New Zealand's NZX50 added 0.35%.

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