Asia Pacific Market: Stocks lost further ground as chances of December Fed rate hike increase

Asia Pacific share market closed down for second straight day on Tuesday, 10 November 2015, amid raising prospect of the U.S. Federal Reserve rate rise by December 2015 and slower-than-forecasted China inflation data.

The latest slide on the domestic bourses materialized as an unexpectedly strong US payrolls report ramped up expectations that the US Federal Reserve will raise interest rates as soon as December 2015. A stronger-than-expected US employment report for October 2015 has increased the odds of a Federal Reserve rate increase in December.

The US appears to be on course for its first interest rate rise in almost a decade next month after higher than expected job creation pushed the unemployment rate down to 5%. Non-farm payrolls - employment in all sectors barring agriculture - increased by 271,000 in October, according to official figures published on Friday, compared with 142,000 the previous month. In September, the US Federal Reserve signalled that, barring deterioration in the US economic recovery, it would raise rates from 0.25% at its December meeting.

The Fed-funds futures market is now pricing in 68% probability of an increase in US benchmark interest rate in December. Investors in emerging markets are worried that once the Fed starts raising interest rates, it will drain liquidity from global emerging markets and redirect it to developed economies. The Fed has held its benchmark short-term interest rate near zero since December 2008. The ultra-loose monetary policy in the US has encouraged heavy investment in higher-yielding emerging markets. The next monetary policy review from the Fed is scheduled on 15-16 December 2015.

Worse-than-expected consumer price index inflation in China stoked investor concerns over the slowing economy. China's consumer price index (CPI), the main gauge of inflation, grew 1.3% year on year in October, the National Bureau of Statistics (NBS) said on Tuesday. The weaker-than-expected reading slowed from the 1.6% gain in September and 2% in August. On a monthly basis, consumer prices edged down 0.3%. Meanwhile, China's producer price index (PPI), which measures wholesale inflation, plunged 5.9% year on year last month, marking a 44th straight month of decline that pointed to continuing weak market demand.

Among Asian bourses

Australia market falls to 1-month low

The Australian share market declined to one-month low, as investors fretted about weakness in commodity prices and a possible interest rate hike in December by the US Federal Reserve. The benchmark S&P/ASX 200 index ended 20.30 points, or 0.4%, down at 5099.20 points, while the broader All Ordinaries index declined 22.30 points, or 0.44%, to 5157.70 points.

Financial stocks lost ground amid fret over housing data and the looming interest rate hike in the United States, with top lenders being major losers. Commonwealth Bank was off 1.1% to A$74.76, Westpac reversed 1.3% to A$30.90, and National Australia Bank was down 0.4% to $27.97, while ANZ rose 0.7% to A$25.54.

Property stocks also came under pressure with Mirvac Group down 2% to A$1.745 and Stockland down 0.8% to A$3.88, as concerns the housing market continue to grow after the auction clearance rates over the weekend fell to 65.7%, its lowest level since February this year.

Materials and resources stocks recovered some ground, with BHP Billiton up 0.7% to A$21.57 on bargain hunting after touching its lowest in six years. Rio Tinto followed rebound, gaining 0.8% to A$49.39 and Fortescue Metal rising 4.6% to A$2.30. Woodside Petroleum rose 0.6% to A$29.40.

Japan stocks closed mixed

The Japanese share market closed mixed, as prospect of the U.S. Federal Reserve rate rise weighed on investor sentiments. The day's notable gainers comprised pharmaceuticals and precision instruments, while pulp and paper and utilities-related issues were among major decliners. The Nikkei Stock Average advanced 28.52 points, or 0.15%, to end at 19671.26 points. The broader Topix index has lost 0.09%, or 1.49 points, to 1589.48 at the close.

Among blue-chip stocks: market heavyweight Fast Retailing, operator of the Uniqlo clothing chain, jumped 1.88%. Shares of automaker Toyota rose 0.05%, while telecoms and mobile phone company SoftBank slipped 0.76%. Toshiba surged 2.09% even after Moody's downgraded the credit rating of the embattled electronics giant.

Shares of lenders propelled on earnings reports.Hiroshima Bank surged 7.8% after raising its profit forecast by 25%. Joyo Bank gained 4.6% as SMBC Nikko upgraded its recommendation on the shares to outperform following an increase in first-half earnings.

Japan Post Bank rose 3.1% on reports the government is considering raising the deposit limit on saving accounts by between 3 million yen ($24,347) and 5 million yen this fiscal year.

China stocks closed mixed

The Mainland China stock market ended softer for the first time in five consecutive sessions in lackluster trade, amid growing concerns about weakening demand in the world's second-biggest economy after slower-than-forecast inflation data. The Shanghai Composite Index declined 0.18%, or 6.40 points, to close at 3640.49 points. The Shenzhen Composite Index, which tracks stocks on China's second exchange, rose 0.82%, or 18 points, to close at 2209.60. The ChiNext Index, which tracks China's NASDAQ-style board of growth enterprises, was up 0.81%, or 21.99 points, to close at 2746.61.

Shares of Chinese securities brokerages extended a rally after comments from policy makers around broader financial reforms and economic growth. Citic Securities Co., the nation's biggest-listed brokerage, rose 1.4%. GF Securities Co. jumped 3.3%.

The People's Bank of China injected CNY10 billion via seven-day reverse repos at open-market operations on Tuesday. A total of CNY20 billion in outstanding reverse repos matures this week. Money-market rates are steady. The seven-day repo opened at 2.25% Tuesday and has opened at this price for 10 consecutive days.

Hong Kong market ends softer

Hong Kong stock market ended sharply down, as profit booking triggered on tracking weak lead from offshore market overnight and worse than expected China consumer price index inflation data. The benchmark Hang Seng Index tumbled 325.07 points, or 1.43%, to 22401.70 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, stumbled 191.67 points, or 1.82%, to 10314.74 points. Turnover increased slightly to HK$82.2 billion from HK$79.5 billion on Monday.

Shares of Brokerage counters also saw selling pressure. CITIC Sec (06030) fell 2.4% to HK$19. Haitong Int'l (06837) slid 2.1 to HK$14.7. CC Securities (01375) sank 2% to HK$4.39.

Macau gaming names fell, dragged by the peers in the US. Galaxy Ent (00027) and Sands China (01928) fell 4% and 3% to HK$25.4 and HK$27.6.

Li & Fung (00494) slid 4.1% to HK$5.86. UBS Research reiterated its "sell" call on the stock, noting downside risks for Li & Fung's revenues.

Indian indices lose further ground

Weakness in Asian markets triggered by disappointing Chinese economic data pulled Indian stocks sharply lower, with the barometer index, the S&P BSE Sensex, falling below the psychological 26,000 level. The Sensex slumped 378.14 points or 1.45% to settle at 25,743.26. The Nifty shed 131.85 points or 1.67% to settle at 7,783.35.

Oil and pharma sector stocks, state-run companies' shares and index heavyweights ITC, HDFC and Infosys led losses for key benchmark indices which remained in red throughout the trading session. The Sensex and Nifty declined for the fifth straight trading session.

Metal and mining stocks declined as deceleration in China's consumer inflation in October 2015, in latest indication that domestic demand remains weak in the world's second biggest economy. Telecom stocks edged lower after Britain's Vodafone Group PLC announced that it has begun preparations for a potential initial public offer (IPO) of its Indian unit Vodafone India.

Dr Reddy's Laboratories tumbled after the company's management reportedly revealed in a conference call yesterday, 9 November 2015, that the US Food and Drug Administration (USFDA) has ordered a third-party audit across the manufacturing network of the company.

Elsewhere in the Asia Pacific region: Taiwan's Taiex index declined 1.2% to 8536.90. South Korea's KOPSI dropped 1.4% to 1996.60. Singapore's Straits Times index lost 0.4% at 2998. Indonesia's Jakarta Composite index slipped 1.1% to 4451. New Zealand's NZX50 declined 0.8% to 6002.80.

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