Asia stocks wary as China concerns remain, oil drops

HONG KONG/TOKYO - Asian stocks held near four-year lows and crude oil prices approached a 20 percent drop in less than two weeks as investors worried over the extent of China's economic slowdown and its impact on emerging markets.

MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.4 percent higher but still stood near a four-year low touched on Monday, and was still down more than 8 percent since the start of 2016. It fell 12 percent last year.

"Investors are still concerned about the extent of China's slowdown and while we may be in the middle of a consolidation phase, we have yet to see any data indicating a turnaround which is feeding the overall uncertainty," said Ben Pedley, head of investment strategy for Asia at HSBC Private Bank in Hong Kong.

With investors still licking their wounds from last year's plunge in global commodity prices and a sharp selloff in Chinese markets, 2016 has brought about more pain for investment portfolios in the form of a deepening slowdown in the global economy and volatile Chinese markets.

Japan's Nikkei fell 1.3 percent after a market holiday on Monday, hitting a three-month low and down over 8 percent so far this year while Chinese stocks swung around in volatile opening trades.

According to MSCI global indexes, BRIC and other emerging market indexes have bled the most so far this year with losses of 7.2 and 6.8 percent losses each. MSCI's broadest gauge of world stocks fell to its lowest level since Sept 2013.

On Wall Street, the S&P 500 managed to stabilize on Monday after three straight days of one-percent-plus declines, ending the day up 0.1 percent.

"It is a good sign that U.S. shares bought back in late trading to end in positive territory ... Maybe they were helped by the view that the Fed may not be able to raise rates when markets were gripped by fear over China and falling oil prices," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

Indeed, money market futures are starting to price out the chance of multiple Fed rate hikes this year, with only a roughly 50 percent chance of a second hike priced in. At the start of the year futures were fully pricing in two rate hikes.

The market is far from convinced that the Fed is going to raise rates in March, after implementing its first rate hike in almost a decade only last month.

Commodity prices remained under severe pressure, with oil prices hitting new 12-year lows on concerns about slow demand and oversupply - including U.S. shale oil production and a likely supply increase from Iran with sanctions lifted.

U.S. crude futures fell to a 12-year low of $30.88 per barrel on Monday, and last stood at $31.19, down almost 16 percent so far this year.

Brent futures fell to $31.17 per barrel, also a 12-year low.

Copper, seen as a good gauge of the strength of the global economy because of its wide industrial use, fell more than 2 percent on Monday to hit 6 1/2-year low of $4,381 a tonne.

Commodity-linked currencies stayed under pressure. The Australian dollar dipped 0.2 percent in early trade to $0.6980 after a small bounce on Monday, edging towards the four-month low of $0.6927 set earlier on Monday.

The Canadian dollar hit a 12 1/2-year low of C$1.4245 to the U.S. dollar on Monday and last stood at C$1.4225.

South Africa's rand was fragile at 16.81 rand to the dollar after a massive plunge on Monday that briefly took it to a record low of 17.995.

The dollar was firmer against other major currencies.

The euro traded at $1.0857, having slipped 0.6 percent on Monday.

The yen, which had been buoyed by safe-haven flows, also stepped back from a 4 1/2-month high touched on Monday at 117.70 yen to the dollar.

The pound was particularly weak due to waning expectations of a rate hike by the Bank of England as well as uncertainty over a referendum on whether or not Britain should stay in the European Union.

It stood at $1.4540, trading near 5 1/2-year low of $1.4491 hit on Monday.

source: www.abs-cbnnews.com

China stocks trading halted after rout

SHANGHAI - China accelerated the devaluation of the yuan on Thursday, sending currencies across the region reeling and domestic stock markets tumbling, as investors feared the Asian giant was kicking off a virtual trade war against its competitors.

Trading on China's stock markets were suspended for the rest of the day, for the second time this week, as a new circuit-breaking mechanism was tripped less than half an hour after the open.

The People's Bank of China again surprised markets by setting the official midpoint rate on the currency at 6.5646 yuan per dollar, the lowest since March 2011.

That was 0.5 percent weaker than the day before and the biggest daily drop since last August, when an abrupt near 2 percent devaluation of the currency also roiled markets.

The impact was immediate as regional currencies went into a tailspin. The Australian dollar, often used as a liquid proxy for the yuan, fell half a U.S. cent in a blink.

Shanghai stocks slid 7 percent to trigger the halt in trading, a repeat performance of Monday's sudden tumble. Japan's Nikkei shed 1.8 percent in sympathy.

A sustained depreciation in the yuan puts pressure on other Asian countries to devalue their currencies to stay competitive with China's massive export machine.

It also makes commodities denominated in U.S. dollars more expensive for Chinese buyers, which could hurt demand and thus further depress commodity prices in a vicious chain reaction.

source: www.abs-cbnnews.com

Chinese stock markets closed after shares fall 7 pct

SHANGHAI, China - Chinese authorities for the first time closed the Shanghai and Shenzhen stock exchanges early under a "circuit breaker" mechanism to curb volatility after shares fell seven percent Monday, raising concern over their commitment to market openness.

China's stock indices plummeted in mid-2015 as a debt-fuelled bubble burst, sending ripples through global exchanges and wiping trillions from market capitalisations.

The falls prompted wide-ranging intervention by Beijing to prop up share prices.

The measures are estimated to have cost hundreds of billions of dollars, but worked -- Shanghai ended the year up 9.4 percent, while Shenzhen soared more than 63 percent.

Even so the country's markets remain volatile -- Shanghai saw a five percent daily fall as recently as November. As part of efforts to prevent a repetition of the rout, authorities instituted the "circuit breaker" system from Monday.

Under it, a five percent drop in the CSI300 index, which covers both bourses, triggers an automatic 15-minute trading halt. A fall of seven percent means the two exchanges are closed for the rest of the day.

But analysts said the "circuit breaker" risked interfering with market efficiency and could even prove counter-productive, heightening volatility instead of reducing it.

“The mechanism is merely a tool and it won’t help the market finding its true value," Northeast Securities analyst Shen Zhengyang told AFP. "With or without the system, the market will continue to drop further if selling pressures piles up."

"What worries me the most is the enforcement of the system will also hurt market liquidity," he added. "Investors who want to sell can't, and those who want to buy also can’t. Trading will dry up if it gets triggered too many times."

Manufacturing concern

Global markets stuttered Monday as a flare-up in tensions between Iran and Saudi Arabia raised concerns about the volatile Middle East. But the Chinese falls followed poor data from official and private surveys of manufacturing activity in the world's second-largest economy.

In addition, a ban preventing shareholders with holdings of more than five percent in a company from selling shares -- introduced in July to help defend prices -- will expire on Friday, triggering fears of a sell-off.

"The market is worried about the upcoming lifting of the rule that bans shareholders from selling," Central China Securities analyst Zhang Gang told AFP.

Official and private Purchasing Manager Index (PMI) surveys both showed contraction, heightening concerns over the health of the key sector.

China on Monday also cut the yuan’s value against the greenback, making it weaker than 6.5 for the first time in more than four-and-a-half years, as pressure on the currency mounts from the country's growth slowdown.

"The weaker PMI and the weaker yuan are the likely triggers," Michael Every, head of financial markets research at Rabobank Group in Hong Kong, told Bloomberg News.

By Monday's early close the benchmark Shanghai Composite Index had tumbled 6.86 percent, or 242.92 points, to 3,296.26.

The Shenzhen Composite Index, which tracks stocks on China's second exchange, slumped 8.22 percent, or 189.75 points, to 2,119.16.

Hong Kong closed on its normal schedule but the Hang Seng Index was down 2.68 percent, or 587.28 points, at 21,327.12.

"Circuit breakers" are not unique to China. The New York Stock Exchange put them into place in the late 1980s, following market crashes. They were first triggered in 1997, the year of the Asian financial crisis, and have rarely gone into effect since.

The device was envisioned as a fail-safe that would give panicking investors an opportunity to rethink their investment decisions, but the threshold for an early market close is signficantly higher: a 20 percent fall.

Zheshang Securities analyst Zhang Yanbing said that although the Chinese circuit breaker temporarily interrupted the fall on Monday, the market was "on a downward trajectory".

"The mechanism is only designed to curb daily volatility, and it’s still a new system", he said. "It’s hard to tell whether the use of the system will reduce or increase the market swings in the future."

source: www.abs-cbnnews.com

China economic growth hits lowest since financial crisis

China's economy logged its worst performance since the global financial crisis, official figures showed Monday, with analysts warning it is likely to worsen and the government must do more to avert a sharp slowdown.

Gross domestic product (GDP) in the world's second-largest economy grew at just 6.9 percent in the third quarter, its slowest rate in six years.

The figures added to fears over the health of the global economy, and some analysts expressed concern they had been manipulated to understate the gravity of the situation.

"China's economic growth is still sluggish with many risks remaining unresolved," ANZ Banking Group chief economist for Greater China Liu Ligang told AFP.

"We should not be over-optimistic. China's economic growth will continue to slow down," he said, adding he estimated GDP would expand 6.4 percent next year.

China's decades-long boom, fuelled by infrastructure investment, exports and debt, made it a key driver of the global economy.

Even though growth has eased in recent years its GDP more than doubled in real terms between 2006 and 2014, according to World Bank figures.

Now it is looking to transition to a "new normal" of slower and more sustainable expansion driven by domestic consumer demand, but the change is proving bumpy and stock exchanges around the world have been pummelled in recent weeks by concerns over its future.

Monday's figure from the National Bureau of Statistics (NBS) was the worst since the first quarter of 2009, although it was marginally above the median forecast in a poll of analysts by AFP.

It was also the first official confirmation of investors' fears over GDP since a Chinese stock market slump over the summer followed by a surprise currency devaluation in August.

Analysts now widely expect Beijing to further boost fiscal spending and ease monetary policy to prevent a sharper slowdown.

China has already cut interest rates five times in a year and reduced the amount of cash banks must hold in a bid to boost lending.

In a research note, Louis Kuijs of Oxford Economics anticipated Beijing would take "additional incremental measures... but without going for major stimulus".



- Figures questioned -
Many China watchers query the accuracy of official numbers, with some suggesting they are manipulated for political reasons.

"Unfortunately, these figures need to be taken with a grain of salt as official GDP growth appears to have become a poor gauge of the performance of China’s economy," Capital Economics China economist Julian Evans-Pritchard said in a research report.

The firm's own measures pointed to growth of only "around 4.5 percent" in the third quarter, it said.

JP Morgan economist Zhu Haibin said strong service-sector growth figures were "somewhat puzzling" as China's stock market correction "should have led to service sector deceleration".

GDP expanded 7.3 percent last year, the slowest pace since 1990, and at 7.0 percent in each of the first two quarters of this year.

The government targets "around seven percent" for 2015.

The NBS in a statement described third-quarter growth as a "slight slowdown" and said the economy was still running within a "proper range".

But it added: "We must be aware that internal and external conditions are complicated, and downward pressure for economic development still exists."

NBS spokesman Sheng Laiyun blamed a weak recovery in the world economy and expectations of a US interest rate rise for China's woes, as well as domestic overcapacity in industries ranging from steel to concrete.

China's growth slowdown has sent prices of commodities ranging from oil to copper to multi-year lows, and led the US Federal Reserve to delay a widely expected increase in borrowing costs.

Analysts attributed the July-September decline to the floundering property market and flagging exports, although retail sales offered some consolation.

They increased 10.9 percent in September, marginally ahead of the previous month.

Fixed-asset investment expanded 10.3 percent on-year in the January-September period -- lower than a median projection for a 10.8 percent increase, according to a survey by Bloomberg News.

And industrial production rose just 5.7 percent year-on-year in September, the NBS said, well down on August's figure.

China's stock market took the figures in its stride on expectations of more stimulus. The benchmark Shanghai stock index closed down 0.14 percent.

source: www.abs-cbnnews.com