Asia Pacific Market: Trades in tight range on Fiscal Cliff concerns

Asia Pacific share markets closed slight above the neutral line after moving in narrow range on Thursday, December 27, 2012, on lingering hopes over fiscal cliff solution as president Obama came back cutting its Christmas holidays short to discuss over Fiscal Cliff.

Meanwhile rise in Chinese industrial profits for the second straight month in November and Japan's new Prime Minister, Shinzo Abe, promised to battle deflation and a strong yen helped buying as well.

President Obama plans to return to Washington on Thursday in order to take part in talks to avert the crisis ahead of the year-end deadline, the White House said late Tuesday. The House and Senate are also expected to reconvene later today. U.S. politicians have until January 1, 2013 to enact a fiscal solution or risk putting the world's largest economy at risk of another recession at hands of $600 billion in expired tax reductions and spending cuts.

 

Both the Republicans and Democrats continue to play games in relation to the fiscal cliff negotiations. An 11th hour deal is a possibility with just a few days remaining until around US$600 billion in tax rises and spending cuts are automatically triggered at the start of 2013 (unless the negotiation period manages to be extended). Taxes on income between US$35,000 and US$85,000 will increase by 3% while higher income earners will also be hard hit. Income earned above $388,000 will be taxed at a rate almost 5% higher than the current 35%.

In the Asia Pacific markets, Japan market continued taking regional lead, helped by Yen depreciation to more than two year low against dollar after Shinzo Abe assumed office as Japan's new Prime Minister and repeated its pledge to push drastic monetary and fiscal measures. The benchmark Nikkei Stock Average 92.62 points higher from prior day to 10,322.98, its highest level since the devastating March 2011 earthquake, i.e. March 10, 2011, when index closed at 10,434.38.

Japanese Prime Minister Shinzo Abe has called for more public works spending to reinvigorate the economy. He wants the Bank of Japan to raise its inflation target from 1% to 2% to drag the country out of two decades of deflation, or steadily declining prices that have deadened economic activity. To help exporters, Abe also has urged the central bank to take steps to dampen Japan's yen.

Australian investors returned to the market after two days of trading break, with the All Ordinaries Index rose by 0.3% to 4661.4, making it the 11th session of gains in 13 trading days. Surfwear retailer Billabong (BBG) gained 4.8%, registered third straight rally, with the group behind the A$527 million bid for the struggling company conducting its due diligence.

The Australian National Retailers Association (ANRA) has forecast that sales nationally will top $1.8 billion over the holiday break, which is a 2.5% rise on 2011. A strong rise in sales using credit cards on Boxing Day is also likely

New Zealand's stock market added gains on Thursday, although in light holiday trading. Gains in the domestic benchmark index were led by Fletcher Building, with US fiscal cliff negotiations likely to be the focus through the year end. Hellaby Holdings rose after agreeing to buy a maintenance and industrial cleaning business. By the provisional closing, the NZX 50 Index rose 7.627 points, or 0.2%, to 4065.447.

South Korea's shares gained modestly in thin trading as gains in technology stocks outweighed losses in high dividend yielding telecom stocks. The benchmark Kospi average rose 0.3%.

South Korean government trimmed its growth forecast for this year and for 2013, underlining the effect of the fiscal woes in the U.S. and the prolonged debt crisis in Eurozone. The finance ministry now expects a growth of 3% in 2013, down from the previously forecast 4% growth. The ministry estimates this year's GDP growth at 2.1%, lower than its September projection of 3.3%.

The Mainland China's shares closed softer today, with the benchmark Shanghai Composite index declined 13.23 points at 2,205.90, paring gains recorded earlier in the week on worries that recent gains were excessive as compared earning prospects. Market participants largely ignored reports stated China's industrial profits gained for a third month in November. The index had risen 13% since this year's closing low of 1,959.77 on Dec. 3, as the nation's new leaders said they would promote urban development as part of economic reforms.

The National Bureau of Statistics stated on Thursday that total profits of China's industrial firms rose 22.8% y/y in November to 638.5 billion yuan, compared with a growth of 20.5% y/y in October. For the first 11 months of 2012, industrial profit only edged up 3% y/y to 4.66 trillion yuan, compared with a growth of 25.4% recorded for the whole of 2011.

The Hong Kong financial market closed modest higher, playing catch-up the rally of the mainland markets over the last two days. The Hang Seng Index advanced 78.60 points to 22,619.78, while Hang Seng China Enterprises Index rose 77.56 points to 11,348.50. However, the benchmark index pared a nearly 17-month high hit intraday because continued concern about the U.S. fiscal cliff kept a lid on gains.

Singapore's stock market closed in the positive terrain, although off intraday highs as European stocks fell early there on concerns about the upcoming fiscal cliff in the United States, the world's biggest economy. Domestic stock palm oil firm Wilmar International and dental chain operator Q & M Dental Group Singapore Ltd were among the biggest gainers. The domestic benchmark index climbed for the third day in a row. By the provisional closing, the FTSE Straits Times Index (STI) increased by 3.12 points or 0.10% to close at 3,183.93.

India's market closed lower on selling pressure triggered by growth concerns after Prime Minister Manmohan Singh said the country faces many challenges to achieve sustainable growth. Investors offloading their positions created recently on the last day of December month expiry in the derivatives segment further fuelled the downtrend. The BSE benchmark Sensex closed 93.66 points lower, or 0.48%, to 19,323.80 on heavy selling in the last 30-minute of trade.

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