Inside Financial Markets

Asian Stocks Decline on China Outlook, Extend Last Week’s Slide

asian markets fallAsian Stocks Decline on China Outlook, Extend Last Week’s Slide

Asian stocks declined, with the benchmark regional index heading toward the worst monthly loss in a year, as Goldman Sachs Group Inc. cut its growth forecast for China amid concern a cash crunch at banks in the world’s second-largest economy.

Industrial & Commercial Bank of China Ltd., the world’s largest lender, lost 1.7 percent in Hong Kong, having risen just one day in June. BHP Billiton Ltd., the No. 1 mining company, declined 3.1 percent, dragging Australia’s S&P/ASX 200 Index lower. AMP Ltd. tumbled 10 percent, heading for its biggest slide in 4 1/2 years, after Australia’s biggest life insurer and pension manager said it expects profit will fall as much as 16 percent.

The MSCI Asia Pacific Index slid 1 percent to 126.45 as of 10:35 a.m. in Hong Kong. About two shares fell for every one that advanced. The measure fell 2.3 percent last week amid concern that Federal Reserve stimulus measures for the U.S. economy are nearing an end and that interbank lending in China is worsening.

“Volatility is going to be the order of the week for the markets,” Vasu Menon, head of content and research at OCBC Bank Ltd. in Singapore, told Bloomberg TV. “China has had a credit binge for way too long. The government is trying to rebalance the economy, trying to downsize the shadow banking system. All that means credit is going to remain fairly tight.”

Regional Gauges

Japan’s Topix index slid 0.1 percent, reversing earlier gains of as much as 1.2 percent. The Bank of Japan probably promised too much when it set a goal of lifting the inflation rate to 2 percent within two years, according to Takahiro Mitani, president of the country’s public pension fund, the world’s biggest.

Australia’s S&P/ASX 200 Index declined 1.3 percent and South Korea’s Kospi index slid 0.6 percent. New Zealand’s NZX 50 Index rose less than 0.1 percent. Hong Kong’s Hang Seng Index fell 1.4 percent and China’s Shanghai Composite Index dropped 2.1 percent.

Goldman Sachs lowered its estimate for 2013 Chinese gross domestic product to 7.4 percent from 7.8 percent, citing weaker economic indicators and tightening of financial conditions, according to a report today from economist Li Cui.

The Hang Seng Finance Index, a gauge of Chinese banks listed in the Hong Kong, headed for a fifth day of losses. ICBC sank 1.7 percent to HK$4.54. Bank of China Ltd. fell 1.3 percent to HK$3.03 and China Construction Bank Corp. dropped 1 percent to HK$5.14.

Monetary Policy

China’s central bank said it may adjust monetary policy as needed, suggesting officials are more open to loosening policies as a cash squeeze risks exacerbating an economic slowdown. The People’s Bank of China said the nation should “appropriately fine-tune” its policies, according to a statement yesterday that summarized the monetary policy committee’s second-quarter meeting in Beijing.

The MSCI All-Country World Index, a gauge of developed and emerging market shares, sank the most in a year last week as almost $2 trillion was erased from the value of global equities after the Fed indicated it could start paring asset purchases this year should the U.S. economy continue to improve.

The MSCI Asia Pacific Index, the benchmark regional equities gauge, retreated 12 percent through last week from the closing level on May 20, which was the highest since June 2008. That left the measure trading at 12.4 times average estimated earnings, compared with multiples of 14.4 for the Standard & Poor’s 500 Index and 12.4 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

DeMark Prediction

China’s Shanghai Composite Index will jump about 12 percent in coming months as its June slump exhausts sellers, Tom DeMark, the creator of indicators to show turning points in securities, wrote in an e-mail from Scottsdale, Arizona, on June 21.

The benchmark index for Chinese equities will climb to 2,323 after producing a buy signal June 21 on the Combo chart, designed to identify market tops and bottoms, said DeMark, who has spent more than 40 years developing market-timing indicators. The Shanghai index fell 9.9 percent this month through June 21, poised for the worst month since August 2009, while the Bloomberg China-US Equity Index of the most-traded Chinese stocks in the U.S. lost 6.5 percent.

BHP, Rio

Futures on the Standard & Poor’s 500 Index slid 0.4 percent today. U.S. stocks fell last week, sending benchmark indexes to their worst retreat since April, after Bernanke said he may phase out monetary stimulus.

Raw-materials producers declined as copper futures retreated. BHP Billiton lost 3.1 percent to A$31.45 and Rio Tinto Group, the world’s second-largest mining company, declined 2 percent to A$51.60 in Sydney. Jiangxi Copper Co., China’s biggest producer of the metal, slipped 2.9 percent to HK$13.92 in Hong Kong.

AMP tumbled 10 percent to A$4.46, poised for its largest slide since October 2008, after saying it expects first-half underlying profit will fall as much as 16 percent. Credit Suisse Group AG said it will reduce its earnings estimates on AMP by A$67 million following the announcement.

In Japan, Acom Co. jumped 6.3 percent to 3,125 yen after the consumer lender announced a stock split. SoftBank Corp. gained 3.2 percent to 5,740 yen after rival bidder Dish Network Corp. abandoned its effort to acquire Sprint Nextel Corp.


Sanie Khan

Sanie Khan holds a deep knowledge of the financial markets in Pakistan. Based in Karachi, he has over 20 years of hands-on management experience in financial technologies and managing operations in the financial sector. He was the General Manager at the Pakistan Stock Exchange (PSX) for 17 years. He along-with senior members of Exchange

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Inside Financial Markets was a joint publication of Pakistan Stock Exchange (PSX)and Society of Technical Analysts Pakistan (STAP)