Asian Markets Slump On Renewed Economic Worries

16 Feb 2009 | 17:52 Asian Markets Slump On Renewed Economic Worries
Stock markets in Asian region opened the week on weaker note as the majority of theregional indices slumped on Monday 16 February 2009, as investors remained dubious aboutthe health of global economy as Japan's economy contracted at its sharpest pace since 1974in its fiscal third quarter, raising the prospect the Bank of Japan may unveil additionalstimulus measures this week to combat a darkening economic outlook in the world'ssecond-biggest economy.

The regional market also got demoted by G7 summit, which failed to go beyond genericstatements of principle. Finance ministers and central bank governors from the Group ofSeven countries voice determination to fight against the global economic slowdown, butfail to announce concrete steps.

At G7 meeting the finance ministers and central bankers endorsed fiscal policy measuressuch as government spending to create jobs and increase economic growth prospects. Butthey also warned against the re-emergence of protectionism.

Meanwhile, on Wall Street, the fiscal stimulus package dominated the US market for theentire week that ended on Friday, 13 February 2009. Capitol Hill remained quite busy withprominent personalities testifying before Senate one another. Market did not show muchenthusiasm to all these except for a couple of days and ignored better than expectedeconomic data. Though the stimulus package got passed at the end with a vote on Fridayevening,

Wall Street registered substantial losses for the week. The Dow Jones Industrial Averagelost 430 points i.e. 5.2% for the week to end at 7,850. Tech - heavy Nasdaq lost 57 or3.6% to end at 1,534. S&P 500 lost 42 or 4.6% to end at 826.

For the day as well, the Dow Jones Industrial Average ended lower by 82 points at 7,850,the Nasdaq closed lower by 7 points at 1,534 and the S&P 500 closed lower by 8 pointsat 826.

In the commodity market, crude oil hovering near $38 a barrel in New York on speculationthe recession in the world's largest economies will slash demand for fuel and energy.

Crude oil for March delivery was at $37.48 a barrel, down 3 cent, in after-hourselectronic trading on the New York Mercantile Exchange at 11:40 a.m. in London. It earlierrose as much as 43 cents to $37.94 a barrel.

The contract jumped 10% to $37.51 a barrel on 13 February 2009, its first gain in six daysand the largest daily increase since 21 January 2009, as traders who had been betting onfurther declines bought oil to limit losses during the three-day Presidents' Dayholiday weekend in the U.S. Pit trading on Nymex will be closed today. The March contractexpires on 20 February 2009. The April contract dropped 23 cents, or 0.6%, to $41.74 abarrel in the sixth straight decline.

Brent crude oil for April settlement was at $44.87 a barrel, down 4 cents, onLondon's ICE Futures Europe exchange at 11:58 a.m. London time. It fell 30 cents, or0.7%, to $44.51 on 13 February 2009.

Gold prices gained $1 an ounce, or 0.11%, to $943.20 in Asian electronic trading on Mondayafter the metal finished mildly lower on Friday as profit-takers took advantage of thehighest prices in nearly seven months. The metal had soared by more than $50 in a two-dayrally entering the session. April gold fell to $942.20, down $7 for the session. Pricesdipped as low as $933.00 earlier in the session.

In the currency market, the U.S. dollar was nearing 92-yen level late Monday in Tokyo. Thedollar bought 91.77 yen early today after ending at 91.17-20 yen in Tokyo on Friday.

The Hong Kong dollar was trading at HK$ 7.7537 against the dollar. Actually The Hong Kongdollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85to the U.S. dollar.

In Sydney trades, the Australian dollar closed weaker against the U.S. dollar afterfinance ministers at the Group of Seven gathering in Rome said there was no quick fix tothe global financial crisis. The Australian dollar closed the trading at US$0.6516, downfrom Friday's close of US$0.6574

In Wellington trades, the New Zealand dollar fell today in the face of unrelenting gloomabout the global economy. The NZ dollar ended the day at US51.93c.

The U.S. dollar was lower against the New Taiwan dollar in Taipei today. The greenback wastrading at NT$34.1530 at 4:07 p.m. on the Taipei Foreign Exchange, up NT$0.01050 fromFriday's closing of NT$ 34.050.

Coming back in Asian equities, the stock markets in Japan, Australia, New Zealand, Taiwan,South Korea, Hong Kong, Malaysia, Philippines and India closed the day on a lower notewhile China, Thailand, Indonesia and Singapore closed the day on a higher note.

In Japan, market ended in a frail manner as Japanese economy contracted 3.3% in the fourthquarter of 2008 compared to the previous three months, marking the biggest decline ingross domestic product since the first quarter of 1974. On an annualized basis, theJapanese economy contracted by 12.7%, the hardest drop in 35 years. Moreover, Japaneseindustrial production was revised further downwards in December. The figure was down 9.8%from the earlier estimated 9.6%.

The Nikkei 225 Stock Average index fell 29.23 points, or 0.38%, to 7,750.17 while thebroader Topix added 5.51 points, or 0.72%, to 770.10.

In Mainland China, the stock markets continued their dictate of bucking the regional trendas investors continued to act on the positive picture emerging on the back of the recenteconomic data even as the rest of the Asian markets and the global markets in generalcontinued to reel under pressure.

The benchmark Shanghai Composite Index, which covers both A shares and B shares on theShanghai Stock Exchange, rose 2.96% or 68.60 points to 2,389.39. The Shenzhen ComponentIndex on the smaller Shenzhen Stock Exchange extended 1.65% or 142.29 points to 8,771.04points.

In Hong Kong, markets followed the regional trend by closing the day lower, as investorsbooked profit from the financial stocks on the eve of earning season. The Hang Seng Indexfell 98.79 points, or 0.73%, to 13,455.88, while the Hang Seng China Enterprise Index,declined by 8.18 points, or 0.11% to 7,560.55.

In Australia, the stock market wiped out weekend gains by the ending the session lower, asspeculation about the health of international banks is again stifling investor confidence,setting Australian shares up for a weak opening this morning. The benchmark S&P/ASX200declined 42.20 points, or 1.19%, to 3,516.90, while the broader All Ordinaries fell 35.40points, or 1.01%, to 3,461.30.

In New Zealand, the equity market commenced the first trading day of the week in thenegative region after rising for two days in a row ending the week slightly up, in thepositive terrain on Friday. The benchmark NZX50 plunged 2.57% or 70.59 points to close at2680.186. The NZX 15 plummeted 3.47% or 176.728 points to 4922.387.

On the economic front, New Zealand's capital goods price index (CGPI) rose 1.1% inthe December 2008 quarter, Statistics New Zealand said today. The most significant upwardcontribution came from the plant, machinery and equipment index while falls were recordedin the residential buildings index and non-residential buildings index. On an annualbasis, the CGPI rose 4.1% in the year to the December 2008 quarter. This followed rises of2.3% and 4.1% in the years to the December 2007 and the December 2006 quarters,respectively.

Moreover, New Zealand's producers' output prices, as measured in the Producers PriceIndex, rose 1.4% and input prices fell 2.2% in the December 2008 quarter, Statistics NewZealand said today. The main contributor to the rise in output prices was the dairyproduct manufacturing index, while fuel wholesaling within the wholesale trade index, wasthe most significant contributor to the fall in the inputs index. In the year to theDecember 2008 quarter, the PPI outputs index rose 9.9% and the PPI inputs index rose 9.7%.


In South Korea, stock market opened the week on a lower note by ending the day in negativeterrain, as export related stocks, mainly steel makers and airlines, showed somecorrection on the back of weaker domestic currency and slumping export demand shown by thegrim January export data. The Korea Composite Stock Price Index fell 16.97 points or 1.42%closing the day at 1,175.47.

On the economic front, exports in South Korea plummeted by a record 33.8% on year inJanuary, according to revised figures from the customs agency. That was lower thanpreliminary reports of a 32.8% annual decline released earlier this month after the 17.9%decline in December. Exports to China were down 38.6% on year, the data showed, whilethose to the United States fell an annual 27.8%.

Revised imports came in lower by 31.9% after the preliminary reading that called for a32.1% annual decline. As a result, the revised trade balance now reflects a deficit of$3.36 billion - down from the preliminary reading of $2.97 billion.

In Taiwan, stock market closed the day on flat note in volatile trading day. The markettouched its one month intraday high in today's trade however, failed to carry theprofits till the last minutes ending the session minutely lower. DRAM makers helped themarket to touch its intraday high while losses in other stocks dragged index lower.

The main Taiex share index ended flat with a marginal fall of 1.24 points or 0.03% at4,591.26. The market moved in the broad range of 4607.97 – 4575.98. The intra dayhigh was the highest since 8 January 2009 when market touched the high of 4789.84 in itsintraday moves.

In Philippines, the equities ended marginally lower today, extending the spree of recentlosses amid mixed global cues and tentative sentiments in the major Asian markets. Thebenchmark Philippine Stock Exchange index shed 3.87 points or 0.20 percent to close at 1,915.79 while the all-share index dropped 2.79 points or 0.2241 percent to 1,242.11.

In Singapore, the equities eased, with the banking and financials continuing to exertconsiderable downside pressure on the broad index amid an aura of gloom in the regionalindices. The benchmark STI Straits Times index ended the day at 1,683.31 points, down22.33 points or 1.31% from the previous close.

In India, the key benchmark indices slumped on sustained unwinding in index pivotalsfollowing disappointment from the interim general budget for 2009-2010, thereby underperforming its global peers.

The BSE 30-share Sensex lost 329.29 points, or 3.42%, to 9,305.45 . The Sensex opened 2.3points higher at 9,637.04, also its day's high. At the day's low of 9,279.10, the Sensexlost 355.64 points in late trade.

The S&P CNX Nifty dropped 99.85 points, or 3.39%, to 2,848.50. Nifty February 2009futures were at 2831.05, at a discount of 17.45 points as compared to the spot closing.

The domestic bourses lost ground as acting Finance Minister Pranab Mukherjee beganoutlining achievements of the Congress-led UPA government when he began his interim budgetspeech at 11:00 IST. The market extended losses later as the budged disappointed the stockmarkets.

There were no sector-specific tax sops for the industry hit by the global economicslowdown in the interim budget for 2009-2010 unveiled by acting Finance Minister PranabMukherjee today, 16 February 2009. No changes were made in direct or indirect taxes. Thestock market was expecting government to offer tax sops and sector-specific stimuluspackage for the economy in the interim budget.

Mukherjee who is currently holding the charge of Finance Ministry, said the UnitedProgressive Alliance government had succeeded in implementing the promises outlined in theCommon Minimum Programme (CMP). The GDP grew from 7.5% in 2004-05 to 9.7% in 06-07 andclocked 9% growth in 2007-08. Per capita income increased 7.4% per annum during the UPAgovernment's tenure. The government relaxed Fiscal Responsibility Budget Management (FRBM)targets to counter global economic slowdown.

The government has extended interest rate subsidy scheme on exports for some sectors till30 September 2009 from 31 March 2009. The government will provide interest rate subsidy tofarmers in 2009-2010.

The fiscal deficit is estimated at 6% GDP in 2008-09. The revenue deficit is seen at 4.4%of GDP in 2008-09. The government spending will rise 6% to 9.53 trillion rupees in theyear starting 1 April 2009. That will result in a budget gap of 5.5% of gross domesticproduct by 31 March 2010, compared with a 3% target. The interim budget estimates includeinitiatives for the first four months of the fiscal year 2009-2010, as well as spendingand revenue estimates for the full year. These figures will be revised when the newgovernment announces its budget after assuming office in May 2009.

Elsewhere, Malaysia's Kula Lumpur Composite index was down 0.29% or 2.65 points to 907.19,while Indonesia's Jakarta composite increased by 3.26 points or 0.24% to 1,342. InThailand, the Thai Stock exchange added 0.87 points or 0.20% to 446.64.

In other regional markets, the European shares fell in early trading on Monday asnationalization fears returned to the banking sector and Daimler shares fell after abroker downgrade. By region, the U.K. FTSE 100 index down 0.6% at 4,165.78, the German DAX30 index down 1% at 4,368.62 and the French CAC-40 index down 1.1% at 2,966.02.