Asia Pacific Market: Stocks fall on uncertainty about a possible US government shutdown

Asia Pacific shares declined on Monday, 30 September 2013, as risk aversion selloff across the board due to weaker than expected China manufacturing growth data and mounting fears of a possible government shutdown in the US.

Investors were offloading risker assets across the region after U.S. budget talks hit an impasse over the weekend, leaving little time for Congress to pass a budget by the midnight Monday, 30 September, deadline which is the end of the US fiscal year and avoid the first federal closure since 1996. Leaders of both parties have said they want to avoid a partial shutdown, although barbed comments suggest that passage is far from certain.

If a continuing resolution cannot be passed by Congress by the end of Monday US time, non-essential parts of the US Federal government will be progressively shut-down. Estimates suggest that a partial shutdown of the US government for several weeks would cut up to 1.5% off US growth in the final quarter of 2013.

Meanwhile, weaker than expected China manufacturing growth data was also triggered selloff. Chinese manufacturing activity ticked up more slowly than expected in September, according to a HSBC survey released on Monday, a sign the gradual recovery in the world's No. 2 economy from an extended slowdown could be more fragile than thought. A survey by HSBC Corp. showed that manufacturing activity expanded marginally this month, rising to 50.2 from August's 50.1, but much lower than the 51.2 in a preliminary version earlier this month. The index uses a 100-point scale on which numbers below 50 indicate contraction.

Further, selling pressure was also fuelled by news of growing political instability in Italy over the weekend. In Italy, five center-right ministers of former premier Silvio Berlusconi's party resigned Saturday from the coalition led by Prime Minister Enrico Letta, throwing the government into chaos.

Among Asian bourses, Japanese market fell steeply today, with export-related shares were leading retreat amidst strength in the Japanese yen on jitters over the tense US government standoff for raising the debt ceiling. The Nikkei Stock Average declined 2.06% to 14455.80 while the broader Topix dropped 1.92% to 1194.10.

Shares of Japanese exporters declined the most, with Kyocera down by 2.8% at 5,210 yen and Honda Motor shed 2.7% at 3,735 yen.

Brokerages were prominent selling targets in Tokyo, with Nomura Holdings fell 3.3% to 765 yen, Daiwa Securities Group Inc dropped 3.4% to 880 yen and Matsui Securities Co shed 3.4% to 1082 yen.

Mizuho Financial Group surrendered 4.1% to 213 yen after the Financial Services Agency on Friday issued a business improvement order to Mizuho Bank, contending it knowingly continued doing business with organized crime groups for more than two years, providing about 230 loans through Orient Corp. and other consumer credit firms. Orient lost 4.6% to 270 yen.

Toshiba declined 1.1% to 440 yen on reports that it will consolidate its three TV plants, shed over 2,000 overseas employees, and cut 20 billion yen from its fixed costs over a two-year period, halting TV sales in a dozen unprofitable overseas markets.

The Ministry of Economy, Trade and Industry released preliminary industrial production figures on Monday, showing that Japan's industrial production declined 0.7% on the month in August due to lower output of general machinery (turbines, etc.), chemicals and automobiles.

The Ministry of Economy, Trade and Industry also released preliminary retail trade data today showing that retail sales in Japan rose 1.1% YoY in August, posting the first year-on-year rise in two months, after -0.3% in July and +1.6% in June. Heat waves boosted sales of summer clothing and beverages while the pace of increase in fuel sales decelerated. Sales of machinery (TVs, etc.) edged up 0.4% after a sharp 7.3% drop in July, indicating a gradual pickup in consumer electronics. Demand for brand name watches, jewellery and other luxury goods remained firm on some wealth effects but general merchandise (department store sales, etc.) rose only 0.4% in August.

The Markit/JMMA Japan manufacturing Purchasing Managers' Index data showed that Japan's manufacturing activity expanded in September by the fastest pace since February 2011. The headline index rose to 52.5 from August's 52.2, remaining above the 50 level that's the dividing line between growth and contraction for the seventh straight month. New export orders in September rose at the sharpest pace since March following a marginal decline in August.

In Australia, Australian financial market declined sharply, dragging the benchmark S&P/ASX200 down by 1.66% from fresh five year high at 5218.90, amid fears of a US government shutdown and weaker than expected China manufacturing growth data.

Materials and resources blue chips were lower in Sydney after weaker than expected China manufacturing PMI data. BHP Billiton was lower by 1.7% to A$35.74 and Rio Tinto 2.5% to A$61.74. Fortescue Metals Group lost 3.9% to A$4.75.

Energy stocks were also lower in Australia as world oil prices fell on Monday amid jitters as a battle loomed in Washington among U.S. political leader over a federal budget needed to avoid a partial shutdown of the government. Benchmark oil for November delivery fell $1.32 to $101.55 per barrel at early afternoon Kuala Lumpur time in electronic trading on the New York Mercantile Exchange. The contract fell 16 cents to close at $102.87 a barrel on the Nymex on Friday. Among energy stocks, Santos declined by 3.7% to A$15.08, Oil Search rose 2.9% to A$8.60, Origin Energy 2.63% to A$14.10 and Woodside Petroleum 1.3% to A$38.31.

In China, Chinese share market advanced, with technology and consumer related blue chips were leading the way up. The Shanghai Composite Index rose 0.68% to 2174.66 while the Shenzhen Composite Index jumped 1.23% to 1056.05.

Volume turnover was relatively thin in Shanghai market as many investors remain stayed on the sideline cautious ahead of the long Golden Week holiday starting Tuesday.

Shares of Shanghai related stocks jumped after the central government inaugurated the Shanghai free trade zone yesterday. Shanghai Oriental Pearl (Group) Co. jumped by the 10% daily limit to 10.54 yuan. Shanghai Xinhua Media Co. climbed 10% daily limit to 8.38 yuan. Shanghai Haibo Co jumped 9.9% to 7.85 yuan.

Shares of retailers and consumer goods rose in Chinese market on hopes of robust sales during week long holiday starting tomorrow. Suning Commerce Group, the retail-chain operator, climbed 10% to 12.85 yuan, while BesTV New Media Co. rose 10% to 52.35 yuan.

In Hong Kong, HK shares suffered steep losses, amid mounting threat of a U.S. government shutdown. The benchmark Hang Seng index was lower 1.5% to end the day at 22859.86, while the Hang Seng China Enterprises Index declined 1.7% to 10316.12. For the quarter of July to September, the HSI dropped 2,056 points, or 9.88%, while the HSCEI climbed 1,005 points, or 10.79%. This year to date, the HSI gained 203 points, or 0.9%, while the HSCEI fell 1,120 points, or 9.79%.

Among the 50 HK blue chips, five were up and 45 were down. COSCO Pacific (01199) slid 3.9% to HK$11.86, while Power Assets (00006) gained 2.6% to HK$69.4 on spin-off news, making themselves the top blue-chip loser and gainer. CKI (01038), a major holder of Power Assets, also benefited from the potential spinoff, gaining 0.3% to HK$53.75.

The financials bore the brunt today in HK market amid worries the US government might faces operation suspension and debt default, with HSBC and AIA dropping 1.2% and 2% respectively. The China-based banks extended losses, as ICBC and China Merchants Bank dropped 2.4% and 2.2% respectively. Tencent fell 2.6%. Power Assets climbed 2.6%.

In India, Indian benchmark indices closed in the red today with the BSE Sensex down 347.50 points, or 1.76%, to 19379.77, on the back of weak global cues and caution ahead of the April-June current account deficit, which is expected to have widened from the previous quarter.

The market sentiment in India was also hit adversely by data showing that foreign funds were net sellers of Indian stocks on Friday, 27 September 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 244.95 crore on Friday, 27 September 2013, as per provisional data from the stock exchanges.

Elsewhere in the region, New Zealand's NZX50 fell 0.97%. South Korea's benchmark Kospi Composite fell 0.74%. Taiwan's Taiex sank 0.69%. Indonesia's JKSE Composite tanked 2.43%. Singapore's Straits Times Index lost 1.32%. Malaysia's KLSE Composite dropped 0.42%.

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