Asia Pacific stocks fall on European debt downgrade, Korean Peninsula woes

Asia-Pacific stock markets fell on Monday, as Europe's debt crisis and global growth worries drove investors away from riskier assets like commodities, mining, and industrials. Meanwhile news of the death of North Korea leader Kim Jong Il also triggered fueled selloff in the markets.

Risk off selloff emerged in the morning after Fitch Ratings put six of the 17-nation currency bloc's countries on negative watch and revised the rating outlook of France to Negative from Stable on last Friday. Moody's lowered Belgium's credit rating by two notches from Aa1 to Aa3, with a negative outlook. S&P is yet to act despite issuing a warning before the EU summit.

 

Fitch Ratings affirmed France's AAA credit but revised the rating outlook to Negative from Stable. The ratings agency also placed its credit ratings for Belgium, Spain, Slovenia, Italy, Ireland and Cyprus on rating watch negative.

Furthermore, selloff also pressured after gloomy forecasts for the French economy. France state statistics agency Insee on last Friday predicted that country's economy would shrink over December quarter of 2011 and the March quarter of 2012, putting it into a recession.

Sentiments was also hammered after news of North Korean leader Kim Jong-il death prompted investors to sell stock, as they were worried that Kim Jong-il's death could cause confusion on the Korean Peninsula.

Regional markets were, however, trimmed losses during late afternoon after the knee-jerk selloff earlier on news of North Korean leader Kim Jong Il's death, supported by window dressing activities ahead of the year-end.

Back to countries, the Sydney benchmark All Ordinaries index tanked 2.5% to 4,113.90, a lowest level since Nov. 25 when index closed at 4,057.60, as broad based risk aversion selloff. All the sectors were in red, with losses were drove by consumer discretionary stocks after bleak trading update from Billabong. Energy, materials, and industrials shares tumbled because of lower commodity prices and less appetite for risk.

Consumer discretionary sector was worst performer in the benchmark index, suffered by steep selloff among retailers after gloomy trading updates from surfwear retailer Billabong.

Billabong shaved off 44.2% to A$2.03 after gloomy trading updates. It warned sales growth had slumped in the lead up to December, prompting it to lower its outlook for its first half earnings. The downgrade follows performance warnings and downgrades from other retailers, including JB Hi-Fi, last week. Billabong anticipated reported EBITDA for the six months ending 31 December 2011 to be in the range of $70 million to A$75 million (compared to A$94.6 million in the pcp).

Woodside Petroleum erased 3.4% to A$30.24. Woodside Petroleum said in a statement that it and its partners would seek amendments to its Browse Basin retention leases, including conditions relating to readiness for a final investment decision. Woodside wants a final investment decision, that is due by mid-2012, extended into the first half of 2013.

In Japan, the benchmark Nikkei Stock Average was down by 1.26% at 8,296.12 while broader TOPIX index fell 0.99% to 716.38, as severe losses exporters, shippers, and commodities plays on heightening worries about Korean Peninsula, Europe's debt crisis, and global growth. The benchmark indices fell to its lowest point since Nov. 28.

The Ministry of Health, Labour and Welfare released wages data on Monday, showing that the total average monthly cash earnings per regular employee in Japan were unchanged on year at 268,628 yen in October, revised down from the preliminary reading of +0.1%.

In China, the Shanghai Composite index closed 0.3% down at 2,218.24 after falling to intraday low of 2,164.89 on Monday, as declines in Asian stocks and persistent concerns about the domestic economy sapped demand for riskier assets.

The People's Bank of China announced on Monday that Chinese banks, including itself, sold a net 27.9 billion yuan in foreign exchange in November, compared with a 24.9 billion yuan net sale in October. A net sale of forex by banks suggests capital outflows and a net purchase points to capital inflows. October's net sale was the first sale since December 2007.

The National Statistics Bureau data revealed that domestic house prices fell last month. China's 49 biggest cities out of 70 posted lower new home prices in November, according to NBS data. New home prices among the major cities slid by 0.35% compared to October. In the second hand home market, 51 cities posted dropping prices.

The National Development and Reform Commission said in a statement released during weekend after a work conference in Beijing that the country will accelerate drafting rules and measures next year to free up sectors, such as railways, urban construction, financial, energy and utilities as part of its efforts to bolster growth.

Back to India, the key benchmark indices recovered after sliding to fresh 2-year lows in mid afternoon trade. The barometer index, BSE Sensex, was down 185.57 points or 1.2%, up 115.04 points from the day's low and off 134.32 points from the day's high. Today's decline on the bourses was broad based. The market breadth was quite weak. Data showing sustained selling by foreign funds over the past few days, ongoing worries about euro-zone sovereign debt crisis and geopolitical worries arising from death of North Korean leader Kim Jong-il hit sentiment adversely.

L&T, Bhel, Sterlite Industries (India), Tata Steel, ICICI Bank, State Bank of India (SBI) and Maruti Suzuki India hit 52-week lows today. Index heavyweight Reliance Industries (RIL) edged higher in volatile trade. FMCG stocks rose on defensive buying in a weak market. Interest rate sensitive banking stocks extended Friday's (16 December 2011) decline as the Reserve Bank of India's decision to keep repo rate unchanged after a policy review on that day disappointed some.

Among other Asian bourses, the New Zealand NZX50 declined 0.69% to 3,223.03. Hong Kong Hang Seng index fell 1.18% to 18,070.21. Singapore Strait Times index dropped 1.55% to 2,618.09. Malaysia KLSE fell 0.78% to 1477.78. The South Korea KOSPI sank 3.43% to 1,776.93. The Taiwan TAIEX index melted 2.24% at 6,633.33. Indonesia Jakarta Composite index was edge up 0.05% to 3,770.29. Philippine PSEi gained 0.31% to 4,318.12.

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