Inside Financial Markets

Asia Stocks Extend Drop on Crimea Vote as Yuan Retreats

asia stock upAsia Stocks Extend Drop on Crimea Vote as Yuan Retreats

Most Asian stocks fell, extending the regional index’s steepest weekly slump since 2012, while bond risk climbed with wheat after Crimea’s disputed vote to rejoin Russia. Chinese shares rose as the yuandropped after the government widened the currency’s trading band.

The MSCI Asia Pacific Index lost 0.4 percent by 1:31 p.m. in Tokyo, led by shares in Japan. Standard & Poor’s 500 Index futures were little changed. The yuan retreated as much as 0.23 percent to this month’s low of 6.1642 versus the dollar, while a measure of Chinese shares in Hong Kong added 0.4 percent. Tencent Holdings Ltd. (700), China’s biggest internet company, tumbled 2.7 percent in Hong Kong as e-commerce site Alibaba Group Holding Ltd. began work on a U.S. listing. Indonesia’s rupiah climbed 0.8 percent to the highest since October.

Global stocks lost $1.4 trillion in value as concern over Russia’s actions in Ukraine’s Crimea and China’s slowing economy spooked investors. Preliminary results show that more than 95 percent of voters in Crimea chose to leave Ukraine, the world’s sixth-largest wheat shipper, and become part of Russia in a referendum deemed illegal by the U.S. and the European Union. China’s central bank doubled the yuan’s trading band as the government promotes a greater role for markets.

“Investors are pretty nervous about the China story at the moment,”Adrian Mowat, Hong Kong-based chief Asia and emerging-market strategist at JPMorgan Chase & Co., said in a Bloomberg TV interview. “This adds to uncertainty. Throw in what’s going on with Crimea, I’d imagine it’s going to be a difficult week for markets.”

‘Dangerous, Destabilizing’

Western countries have threatened to ratchet up sanctions against Russia if it doesn’t back down on annexing Crimea. Russia has deployed about 60,000 troops along the Ukrainian border, the government in Kiev said. The majority of Crimea’s residents are ethnic Russians and PresidentVladimir Putin says they are at risk after last month’s ouster of Ukraine’s president Viktor Yanukovych, who was backed by the Kremlin.

Wheat climbed 0.8 percent today after entering a bull markets last week. The international community “will not recognize the results of a poll administered under threats of violence and intimidation from a Russian military intervention,” the White House said in a statement. “Russia’s actions are dangerous and destabilizing. Military intervention and violation of international law will bring increasing costs for Russia.”

MSCI’s Asia-Pacific measure fell 3.5 percent last week, its first drop in five weeks. About five stocks retreated for every three that gained on the gauge, with just two of 10 industry groups increasing.

Alibaba IPO

Softbank Corp., the Japanese mobile operator controlled by billionaire Masayoshi Son, was the biggest support to the regional index. Shares in the company, which owns about 37 percent of Alibaba, surged as much as 6.6 percent on news the Chinese firm is moving toward what may be the biggest initial public offering since Facebook Inc. in 2012.

Hong Kong’s Hang Seng Index (HSI) dropped 0.3 percent with Tencent leading declines. The Hang Seng China Enterprises Index climbed after capping its biggest weekly drop since October last week.

Tencent is headed for its biggest four-day loss since November 2011 as Alibaba’s IPO adds to concerns that curbs on some electronic payment services in China will dent earnings prospects for the best-performing stock in the Hang Seng Index this year.

Alibaba, China’s biggest e-commerce company, has started the process of undertaking a U.S. initial public offering after struggling to get Hong Kong to approve its proposed governance structure, according to a person familiar with the matter.

Japan’s Topix index slid 0.9 percent while the Nikkei 225 Stock Average lost 0.3 percent after sliding 6.2 percent last week, the biggest slump since June and the worst performance among 14 developed markets tracked by Bloomberg.

Yuan Options

Australia’s S&P/ASX 200 Index dropped 0.2 percent today. New Zealand’s NZX 50 Index (NZSE50FG) gained 0.2 percent and the Kospi index in Seoul increased 0.2 percent.

Options traders have turned more bearish on the yuan as the currency is allowed, from today, to trade as much as 2 percent on either side of a daily reference rate set by the People’s Bank of China.

The onshore spot rate fell as much as 0.2 percent in Shanghai. One-year options granting the right to sell the yuan cost 1.46 percentage points more than contracts allowing purchases as of 10:26 a.m. in Hong Kong, according to data compiled by Bloomberg. The gap reached 1.48 percentage points, the most since September.

Indonesia’s rupiah rose to a 19-week high after foreign funds pumped money into local stocks as Jakarta Governor Joko Widodo announced he would run in July’s presidential election.

Overseas investors added $656 million to holdings of Indonesian equities, the most since May, on March 14 as the Indonesian Democratic Party of Struggle (PDI-P) said Widodo, known locally as Jokowi, would be its candidate. That helped push the Jakarta Composite (JCI) index up 3.2 percent and into bull-market territory.

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)