Asia-Pacific stocks fall on EU summit doubts

Asia-Pacific equities dived in red terrain on Thursday, as investors opted for profit booking following sharp rally prior day on renewed doubt that an EU summit will generate a comprehensive deal to tackle the region's debt crisis after pessimistic view of the German Government on solving the debt crisis. Meanwhile threatening from S&P to downgrade EU's triple-A credit rating and unexpected fall in Japan's machinery orders in October also weighed on risk appetite.

But losses witnessed across the region were minimal on lingering expectations about positive outcome of the two-day EU summit starting later today to contain the region's debt crisis and hopes that the European Central Bank will announce interest rate cut.

Risk appetite for equities damaged after a German official said the governments appear unlikely to reach a deal this week, denting hopes that Friday's crunch EU summit will generate a comprehensive deal to resolve the euro zone's debt crisis. The official said it could take until Christmas.

Ratings agency Standard & Poors said on Wednesday that it's putting the European Union's on review for a possible downgrade of its triple-A credit rating because the EU's dependence on member states for its budget needs for the action.

The S&P Wednesday move follows up on a similar action taken Dec. 5 in regard to 15 of the 17 members of the euro because of the eurozone's debt crisis. The eurozone member countries contribute 62% of the EU's revenues. Standard & Poors said its credit review would focus on the financial ability of eurozone countries to support the EU's repayment of its debts.

There more pressure on the EU leaders to come up with concrete measures to solve the two-year old debts debacle after Standard & Poor's warned that it may carry out a credit downgrade of euro zone countries en masse if their leaders fail to move decisively on solving the region's debt woes at a summit this week.

The unprecedented warning to downgrade 15 countries including top-rated heavyweights such as Germany and France from Standard & Poor's credit ratings agency early this week came as France and Germany announced an initiative, to be discussed at the Friday summit, to impose budget discipline across the euro zone through treaty changes.

The credit warning has put EU leaders under additional pressure to produce quick results to stabilize markets and regain confidence. If core euro zone nations are downgraded, the European rescue fund will find it tough to attract investor interest in its bond offerings.

Turnover across the regional bourses were relatively thin than daily average as many investors stayed on the sidelines ahead of the two-day EU summit starting later on Thursday and the European Central Bank's governing council holds its policy meeting later today.

Back to countries, the Sydney stockmarket the session below the neutral line, weighing the benchmark All Ordinaries Index 0.28% lower at 4,338.90, suffered by disappointing domestic employment data and after pessimistic view of the German Government on solving the debt crisis.

The Statistics Bureau of Australia released data on the labor force for the November, 2011, revealing that Australian unemployment rate increased inflation adjusted 0.1 percentage points to 5.3 per cent in November. The ABS reported the number of people employed decreased by 6,300 to 11,457,100 in November. The decrease in employment was driven by a decrease in full-time employment, down 39,900 people to 8,026,300, and was offset by an increase in part-time employment, up 33,600 people to 3,430,800.

In New Zealand, the Wellington stock market benchmark NZX 50 Index fell 13.097, or 0.4 percent, to 3269.946, inline with generally weaker Asian bourses. Investors reduced risky positions ahead of a European summit on the region's sovereign debt crisis, and as economic data from Japan and Australia signaled the global economy is slowing.

In Japan, the Tokyo benchmark Nikkei Stock Average fell 0.66% at 8,664.58, as investors indulged whole day in profit taking on doubt over concrete outcome from an EU summit. Selloff was further fueled after S&P warning on Wednesday to downgrade the EU and yen appreciation against the euro.

Wafer manufacturer Sumco closed 4.5% down at 641 yen after the company trimmed its fiscal year group net profit forecast to a loss of 9 billion yen from a previous forecast of 2.5 billion yen profit.

Government data showed Japan's core private-sector machinery orders, a leading indicator of corporate capital spending, fell 6.9%t in October from the previous month.

The Ministry of Finance said on Thursday that Japan's trade balance for the first 20 days of November posted a deficit of 366.64 billion yen after making a deficit of 280.17 billion yen in the whole of October. Exports in the first 20 days of last month fell 7.2% on the year to 3.39 trillion yen after falling 3.8% in the whole of October. Imports rose 3.9% y/y to 3.76 trillion yen in the first 20 days of November following a 17.9% rise in the previous month.

In China, the benchmark Shanghai Composite index ended today's trade 0.12% down at 2,329.82, after hovering between in and out of the boundary line in relatively lower turnover on lingering concerns over a slowing domestic economy and ahead of the release of November CPI due Friday. Meanwhile pessimistic view of the German Government on solving the debt crisis and threatening from S&P on Wednesday to downgrade the bonds of all EU countries also kept limit on risk appetite. But market losses were minimal on optimism that domestic inflation may drop below 5%, due for release tomorrow, and on expectations the EU summit will take decisive steps to contain the region's debt crisis.

A looming domestic economic slowdown has been weighing on investors' minds after the Chinese Academy of Social Sciences said yesterday that China's gross domestic product would increase 9.2% annually by year end, 1.2 percentage points down from last year's growth.

Drug makers underperformed on concerns over rising costs after the government issued a blueprint that aims to intensify monitoring of pharmaceutical companies to boost the country's drug safety over the next five years. Shares in Harbin Pharmaceutical Group lost 0.4% to 8.18 yuan, Yabao Pharmaceutical Group 0.7% to 7.31 yuan, and Kangmei Pharmaceutical 2.9% to 13.31 yuan.

Steel makers rebounded on bargain hunting following recent selloff. Brazilian miner Vale SA announcement that iron ore prices will relatively stable for the coming two to three months also buoyed gains. Wuhan Iron & Steel gained 0.6% to 3.17 yuan, Angang Steel 0.4% to 4.82 yuan, and Inner Mongolia Baotou Steel 4.2% to 4.45 yuan.

In Hong Kong, the benchmark Hang Seng index fell 0.7% to 19,107.81, registering second fall this week, as investors opted to cashed in yesterday rally.

Realty developers closed down. Credit Suisse expects HK residential property prices to fall by 10% in 2012 due to a potential rise in unemployment. Hang Lung Properties fell 1.9% to HK$23.65, Cheung Kong 1.1% to HK$90.60, and Henderson Land 1.2% to HK$37.85. Hong Kong-listed mainland developers' continued ended in diverse terrain after many players reporting on-month falls in property sales for November. China Overseas Land fell 0.3% at HK$14.32 while China Resources Land rose 0.8% to HK$12.92.

In India, the Bombay Stock Exchange benchmark Sensex plummeted 2.3% at 16,488.24, on heavy selling by institutional investors and retail investors on doubtful about domestic policy reforms and ahead of European Union summit. Demand of BJP led opposition parties for resignation of Home Minister P Chidambaram on his alleged role in 2G-spectrum case also kept the investors nervous. All sectoral indices ended deeply in red, with BSE capital goods index was the biggest sectoral loser. Heavy sell-off was also seen in realty, metal and oil & gas sectors.

Among other Asian bourses, the Malaysia KLSE Composite dropped 0.68% to 1,472.92. Singapore Strait Times index fell 1.95% to 2,728.31. Indonesia Jakarta Composite index was down 0.3% to 3,781.76. The South Korea KOSPI declined 0.37% to 1,912.39. The Taiwan TAIEX index dropped 0.71% at 6,982.90. Philippine PSEi fell 0.05% to 4,312.89.

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