Asia Pacific Market: Stocks weakens as traders eye Fed policy prospects

Asia Pacific share market closed mostly down on Friday, 26 August 2016, as investors remained cautious ahead of important speech later this evening by Federal Reserve chair Janet Yellen on the outlook for US interest rates.

The market remained on the shady side for the rest of the day, as selling to square positions grew ahead of Fed chief Janet Yellen's speech in Jackson Hole, Wyoming, later today. Global central banker will be gathering in Jackson Hole, Wyoming, where Yellen will make a speech on Friday, which markets expect will provide fresh clues on the U.S. monetary policy outlook. Markets have been on edge in recent weeks as some Fed officials raised the prospects of a U.S. rate hike as early as September.

 

Odds that the Fed will boost rates in September have jumped to 32 per cent from 18 per cent at the end of July, while traders are betting there's a 57 per cent chance of tightening in December.

High US interest rates would pull money out of emerging markets and redirect it to the US. Minutes from the Federal Open Market Committee's (FOMC) July meeting showed officials were split on whether an increase in interest rate was needed soon.

West Texas Intermediate crude rose 1.2 per cent on Thursday after a report that Iran's oil minister Bijan Namdar Zanganeh will participate in an informal gathering of Opec members next month in Algiers. Saudi Arabia's energy minister Khalid Al-Falih said an oil-output freeze would be "positive," while ruling out a production cut.

Among Asian bourses

ASX200 drops 0.48%

Australian share market finished session down, as selloff pressure triggered on caution ahead of speech by US Fed chair Janet Yellen later in the global day. Most of ASX sectors declined, with shares of industrial, realty, energy, financial, and material blue-chip companies being major losers. At close of trade, the benchmark S&P/ASX 200 index declined 26.40 points, or 0.48%, to 5515.5. The broader All Ordinaries shed 24 points, or 0.43%, to 5607.40.

Today major banks and the big miners lost weight. The Commonwealth Bank dropped 1% to close at A$73.26, while BHP was down 0.7% to A$20.88 and Woodside Petroleum 0.6% to A$29.68. Woolworths lost 1% to close at A$24.90 after yesterday's A$1.5 billion full year loss.

Coca-Cola Amatil, the maker of Coke in Australia, today released its half year results showing a 7.8% increase in profit to A$198.2 million. Its shares lost 4.3% to close at A$9.17.

Mayne Pharma added 3.4% to close at A$1.98 after posting a 379% rise in profit to A$37.4 million.

Cabcharge posted 45% fall in full year profit to A$25.61 million as it writes down the value of its taxi licence portfolio and gets hit by new regulations for lower service fees. Its shares dropped 10% to close at A$3.27.

Nikkei turns lower ahead of Yellen speech

The Japan share market stumbled on following weak lead from Wall Street overnight and on position-adjustment selling ahead of guidance from U.S. Federal Reserve Chairwoman Janet Yellen. The Nikkei average lost 41.35 points, or 0.25 percent, to end at 16,555.95. The Topic index fell 2.44 points, or 0.19 percent, to end at 1,304.27.

Exporters such as auto makers tend to suffer from U.S. dollar weakness against the Japanese yen. Yield-curve declines make investments difficult for insurers and hit their margins. Toyota Motor fell 3.4% to 5,911 yen. Subaru-maker Fuji Heavy Industries dropped 1.6% to Y3,756. MS&AD Insurance Group Holdings lost 3.3% to Y2,789. Sompo Japan Nipponkoa Holdings fell 2.8% to Y3,147.

FamilyMart fell 1.4% to Y7,800 after the Japan Fair Trade Commission told the convenience-store operator to pay its contractors a total of Y650 million ($6.5 million) because FamilyMart had violated the law by either collecting money via inappropriate means or failing to make payment in full. FamilyMart said it has accepted the advisory and arranged the payments.

China Market ends marginally up

Mainland China stock market closed marginally above the neutral line, as investors chased for bargain buying after regulators' denial that insurance money is getting pulled out of the market. The China Insurance Regulatory Commission (CIRC) late on Thursday denied a market rumour in a local media that 600 billion yuan ($90.17 billion) worth of insurance money would gradually exit the market due to tougher rules. The CSI300 index, which tracks the largest listed companies trading in Shanghai and Shenzhen, fell 0.06% to 3307.09 points. The Shanghai Composite Index closed up 0.06% at 3070.31 points while the Shenzhen Composite index closed up 0.2% at 2023.09 points. The Shanghai Composite Index fell 1.2 percent for the week.

Banking shares were firm as investors took relief that newly-released earnings by some of country's biggest lenders didn't show a sharp deterioration in asset quality as many had feared. Bank of Communications (BoCom), which reported near flat first-half profit, saw its bad loan ratio also stay stable from the previous quarter. Disclosure that government-backed funds increased holdings in BoCom by 570 million A shares also helped sentiment.

Hong Kong Market slightly rebound in quiet trade

The Hong Kong stock market fluctuated throughout the day before closing slightly higher, despite the weaker close of the US equity markets overnight, as investors remained cautious ahead of a speech later this evening by Federal Reserve chair Janet Yellen on the outlook for US interest rates. Most sectors in Hong Kong rose, led by energy and tech stocks. The benchmark Hang Seng Index added 94.59 points, or 0.41%, to 22909.54 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, rose 45.26 points, or 0.48%, to 9550.04. Turnover decreased to HK$54.8 billion from HK$68 billion on Thursday.

Banking and insurance sectors were also among the gainers, with China Life Insurance jumping 3.4 per cent to close at HK$19.08 after Deutsche Bank upgraded its target price to HK$31.4.That came after the nation's largest insurer said on Thursday night that its first-half net profit fell 67 per cent to Rmb10.4 billion, due to investment losses. But its new business value reached Rmb28,021 million, an increase of 50% from a year earlier. Ping An (02318) edged up 0.3% to HK$40.1. PICC P&C (02328) added 1.3% to HK$12.78. Bank of Communications rose 0.52 per cent to close at HK$5.76 after it reported a 0.9 per cent gain in net profit, which amounted to 37.66 billion yuan late on Thursday. China Construction Bank, however, dropped 0.86 per cent to close at HK$5.77 after it reported a 1.15 per cent profit growth of 133.41 billion yuan.

Mengniu Dairy (02319) surged 5.6% to HK$15.42 on top of yesterday's 12% rally post 1H results. Both JP Morgan and Credit Suisse have upgraded their ratings and target prices for the stock.

The Apple supply chain OEMs became targets of buying. AAC Tech (02018), which is to be included into the HSI, added 1.7% to HK$82 on a 9% interim earnings growth.

ZTE Corp (00763) dived 8.5% to HK$10.58 as Credit Suisse sees bigger-than-expected impact on the overseas business from the US investigation, leading to huge pressure on operating pressure.

Nifty hits lowest closing level in more than 3 weeks

Indian benchmark indices registered small losses after witnessing volatility towards late trade. The barometer index, the S&P BSE Sensex, lost 53.66 points or 0.19% to settle at 27,782.25. The Nifty 50 index lost 19.65 points or 0.23% to settle at 8,572.55.

Stocks of public sector banks edged lower. Stocks of private sector banks were mixed. Capital goods stocks edged lower. Index heavyweight Reliance Industries nudged higher. Tata Motors shrugged off weak Q1 results. Biocon gained after European Medicines Agency accepted for review Biocon's partner Mylan's marketing authorization application for a proposed biosimilar Trastuzumab.

The Reserve Bank of India (RBI) said in a draft paper on banks' large exposure (LE) limit that large exposure limit in respect of each counterparty and group of connected counterparties will be capped at 20% and 25% respectively of the bank's eligible capital base under normal circumstances. The eligible capital base will be defined as the Tier 1 capital of the bank as against capital funds at present. A group of connected counterparties will be identified on the basis of 'control' as well as 'economic dependence' criteria. The RBI has sought public comments on the draft LE framework by 15 September 2016.

Separately, RBI has allowed banks to issue rupee bonds overseas (Masala Bonds) for their capital requirements and for financing infrastructure and affordable housing. This was a part of the measures announced by RBI for the development of fixed income and currency markets.

Elsewhere in the Asia Pacific region: New Zealand's NZX50 fell 0.5% to 7391.30. South Korea's KOSPI index declined 0.3% to 2037.50 Taiwan's Taiex index rose 0.2% to 9131.72 . Malaysia's KLCI was up 0.2% to 1683.09. Singapore's Straits Times index dropped 0.7% to 2857.65. Indonesia's Jakarta Composite index dropped 0.3% to 5438.83.

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