Asia Pacific Market: Stocks sink on Syrian concerns

Asia Pacific market tumbled to a seven-week low on Wednesday, August 28, 2013, as broad based risk aversion selloff amid continued worries about the situation in Syria and on uncertainty over the prospects that US may take military action in Syria in response to the use of chemical weapons by the Syrian Government in a devastating attack on civilians. The MSCI Asia Pacific Index lost 2%.

Investors across the globe offloading risk assets amid mounting jitters over a possible US led military strike against the Syrian government. US President Barack Obama is working with allies including the U.K. and France to gearing up for a probable military action against President Bashar al-Assad's forces, which were blamed for last week's chemical weapons attacks against civilians, fanning concern unrest may disrupt Middle East oil supplies.

While Syria is not a major oil supplier, traders are concerned that the conflict may draw in Iran, a key ally of Syria and a big oil producer. The Middle East nation also shares a border with Iraq, another larger oil producer in the region.

Wells Fargo Advisors chief international strategist Paul Christopher said any potential change in the balance of power in Syria's civil war poses a new uncertainty for financial and commodity markets, but it doesn't immediately threaten the global economy.

Tension in Syria has worsened a layer of nervousness on top of speculation the US Federal Reserve will begin tapering stimulus which is having a very big impact on carry trade globally and having a very big impact on emerging markets.

Emerging markets have been reeling for the past few weeks on expectations that the U.S. Federal Reserve will reduce its $85 billion a month bond-buying program as soon as next month. Data from EPFR Global, a Cambridge, Massachusetts-based firm that tracks fund flows showed that global funds have withdrawn about $44 billion from emerging-market stock and bond funds since the end of May through last week.

The news on Syria overshadowed improving economic indicators, such as raising US home prices and Germany's Ifo business survey hitting its highest in 16 months.

Home prices increased 12.1% for the year ending in June, according to the S&P/Case-Shiller index tracking prices in 20 major US cities. The rate of increase is significantly higher than market expectation, but down from a gain of 12.2% for the year ending in May.

A closely watched index of German business optimism raised more than expected in August, underlining improving growth prospects for the struggling euro area. The Ifo index rose to 107.5 from 106.2 in July. Market had expected 107.0. The increase in the ifo index for fourth straight month cementing sign of Germany's improving economy, which expanded a robust 0.7 percent in the second quarter from the previous quarter and helped pull the 17-country currency union out of 18 months of recession. The euro zone expanded 0.3 percent from the quarter before.

Among Asian bourses, Tokyo stock market tumbled, as heightened fears of a US-led military intervention in Syria sparked a selloff in exporters and other cyclical stocks. Meanwhile overnight losses on Wall Street and the dollar's fall against the yen also fueled selling. The Nikkei Stock Average tumbled 1.51% to 13,338.46 and the broader Topix gave up 1.76% to 1,114.03.

Shares of export related stocks were major losers in Tokyo as the US dollar strengthened from Tuesday's levels to hover around lower-97 yen. Sony Corp dropped 3.4% to 1967 yen and Canon Inc 1.4% to 2957 yen. Tokyo Steel Manufacturing Co sank 8% to 492 yen and Kubota Corp 2.4% to 1325 yen. Suzuki Motor Corp skidded 5.4% to 2059 yen, Honda Motor Corp 2.4% to 3610 yen and Toyota Motor Corp 2.3% to 6020 yen.

Australian share market finished lower on broad based selling amid worry about military intervention in Syria. The benchmark S&P/ASX200 declined 54 points, or 1.05%, to 5087.20, while the broader All Ordinaries fell 52.80 points, or 1.03%, to 5078.

Shares of the resource and energy sectors saw heavy selling in Sydney despite sharp gains for oil and Rio Tinto lost 2.6% to A$58.16. Energy firm Santos declined 1% to A$14.55.

Shares of Woolworths rose 2% to A$34.59 after saying it expects subdued retail conditions in fiscal 2014, but projecting earnings growth of 4% to 7% from continuing operations for the year. Woolworths posted a 24.4% lift in full-year net profit to $2.26 billion. Profit from continuing operations before significant items rose 8% to $2.354 billion when taking into account a one-off loss of $32.8 million before tax incurred on the sale of assets to the SCA Property Group, $25.8 million in redundancy costs relating to the sale of its trucking fleet and $82.3 million for the redemption of US bonds. The result was driven by the food and liquor business, which boosted pre-tax earnings by 8.7% to $3.199 billion (although that was for a 53 week year against 52 weeks in 2011-12), as well as a 34.7% earnings kick from its hotels and gaming division and 7.2% earnings growth for its Big W merchandise and apparel retail banner.

Shares of AGL Energy rose 4.9% to A$15.08 after the energy group disclosed the gross margin per customer had reached A$200.47, up from A$194.03 a year earlier. This rise of 3.3% is significantly above the rate of inflation, which has been running at about 2.5% a year over the past few years. AGL margins came under pressure in the South Australian and Queensland markets due to onerous price controls. In NSW the company expects the government will support full deregulation once a review is completed next month. AGL said government policy in NSW had forced it to write off the value of gas reserves in NSW by $343 million. Almost half of its reserves near Camden, south-west of Sydney, nearly a quarter of its reserves in Gloucester and all of its reserves in the Hunter valley were now ''sterilized'. From October, AGL plans to revamp its customer billing, so that customers can choose whether to pay quarterly, monthly or even fortnightly. This change will apply to all customers, with provision to allow households to read their own meters for billing purposes

China stock market declined for the first time in three days in row, with the losses of papermakers and realty outweighed the gains of gold producers, trading and logistics firms. The benchmark Shanghai Composite index fell 2.27 points, or 0.11%, to end the day at 2101.30.

Shares of papermakers declined in Shanghai amid worry that the import cost of raw materials would increase once the US launches air strikes on Syria. Yanbian Shixian Bailu Papermaking Co lost 2.7% to 4.37 yuan. Minfeng Special Paper Co fell 2.3% to 7.15 yuan.

Shares of Chinese bullion producers rallied as speculators believed the escalation of war in Syria may spur demand. Shandong Gold Mining Co locked 10% upper circuit at 25.28 yuan. Zhongjin Gold Corp leapt by the daily limit of 10% to 10.96 yuan.

Shares of trading and logistics firms ended higher in Shanghai, boosted by the establishment of a free trade zone in Shanghai. Orient International Enterprise jumped 5.1% to 10.26 yuan. Shanghai International Port (Group) Co locked 10% upper circuit at 3.74 yuan. Shanghai Material Trading Co leapt by the daily limit of 10 percent to 11.99 yuan.

Hong Kong's shares have finished lower, dragged down by the risk aversion selloff as US forces readied for possible military action against Syria. The Hang Seng Index fell 1.55% to 21536.31 and the Hang Seng China Enterprises Index sank 2.25% to 9763.29.

Shares of Kunlun Energy lost 13.2% to HK$10.92 after PetroChina said three of its senior executives, including the chairman of Kunlun, were under investigation by authorities for severe disciplinary violations. PetroChina slumped 4.2% to HK$8.29 on news of senior executives are under investigation for discipline violation.

In India, key benchmark indices continued to trim early losses on market buzz that Life Insurance Corporation (LIC) was spotted buying shares on Wednesday, 28 August 2013, thereby bringing some support at lower levels. The S&P BSE Sensex was down 132.14 points or 0.74%, up close to 387 points from the day's low and off about 52 points from the day's high. The market breadth, indicating the overall health of the market, was weak. Cement stocks tumbled. ITC rose over 1%. Asian Paints tumbled close to 6%.

Indian rupee slumped in choppy deals and hit record low below 68 against the dollar. The partially convertible rupee was hovering at 68.08 against the dollar, sharply lower than its close of 66.24/25 on Tuesday, 27 August 2013. Rupee depreciation fuels inflation, increases import bill and current account deficit. It also increases the government's spending on fuel subsidies, potentially widening the fiscal deficit. The rupee has fallen sharply this month due to concerns that India will find it tough to close its wide current-account gap when developed countries end their easy-money policies.

Investor sentiment in India has been hit adversely on concerns about government finances after the Lok Sabha on Monday, 26 August 2013, passed the Food Security Bill. The massive outlay of funds required for rolling out the programme is bound to raise the government's fiscal deficit. The market sentiment was also affected adversely by data showing that foreign funds remained net sellers of Indian stocks on Tuesday, 27 August 2013. Foreign institutional investors (FIIs) sold shares worth a net Rs 1373.99 crore on Tuesday, 27 August 2013, as per provisional data from the stock exchanges.

Elsewhere, Taiwan's Taiex ended 0.05% up. South Korea's KOSPI lost 0.07%, Malaysia's KLSE Composite fell 1%, New Zealand's NZX50 shed 0.7%, Singapore's Strait Times fell 1.3% and Indonesia's Jakarta Composite declined 1.5%.

Powered by Capital Market - Live News