Wednesday 20 February 2013

Asia stocks tumble after Fed minutes

By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) — Asia stocks tumbled on Thursday after minutes from the latest Federal Reserve policy meeting stoked concerns that central-bank policy-tightening moves will reduce the global liquidity that has supported stocks in recent months.
Hong Kong’s Hang Seng Index HK:HSI -1.70%  dropped 2.1%, while the Shanghai Composite Index CN:000001 -2.88%  plunged 3%.

Reuters
In Japan, the Nikkei Stock Average JP:100000018 -1.39%  lost 1.4%, South Korea’s Kospi KR:SEU -0.47%  declined 0.5%, and Australia’s S&P/ASX 200 index AU:XJO -2.33%  tanked 2.3% lower.
Minutes out Wednesday covering the Federal Reserve’s meeting in January offered investors differing views over the prospects for continued stimulus, prompting a sharp fall in U.S. stocks Wednesday. Read: Fed, uneasy over ‘QE,’ plans bond-buy debate
The Fed, along with other global central banks, has provided massive amounts of liquidity to markets since the onset of the global financial crisis — liquidity which has worked its way through to various asset classes.
The Fed’s most recent addition to its liquidity-boosting moves came late last year, when it pledged billions of dollars a month of asset buying until the U.S. jobs market picks up.
Still, the minutes out Wednesday revealed that many Fed officials are worried about the costs and risks arising from the central bank’s quantitative-easing program, with the Fed’s balance sheet recently passing the $3 trillion mark. The Fed minutes indicated the central bank will review the program in March.
Perpetual Investments head of investment research Matthew Sherwood said that while stocks had gained aggressively over the past eight months, in part due to central-bank largesse, “all of a sudden” that pillar of market gains may be at risk.
Crédit Agricole strategist Frances Cheung agreed, saying that Asia investors were concerned that “a smaller-than-anticipated size of the Fed balance sheet ... would imply less funds available to purchase [assets] than what is currently priced in.”
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The U.S. dollar surged on Wednesday, with the ICE dollar index DXY +0.12%  trading at 81.069 Thursday in Asia, just off from 81.074 late Wednesday but still well above Tuesday’s 80.450 level.
“There's been a flight to quality into U.S. dollar assets,” said Sherwood at Perpetual Investments.
Gold dropped again in Asia on Thursday, and commodity-related firms fell sharply across Asia. Australian mining giant Rio Tinto Ltd. AU:RIO -3.01%   RIO -3.83%  fell 3%, rival BHP Billiton Ltd. AU:BHP -3.83%   BHP -4.23%  dropped 3.8%, and gold producer Newcrest Mining Ltd. AU:NCM -3.66%   NCMGF -1.56%  fell 3.7%.
Commodity producers losing ground in Hong Kong included Aluminum Corp. of China Ltd. HK:2600 -2.82% ACH -2.98%  , also known as Chalco, which dropped 3.4%.
In Shanghai, Chalco CN:601600 -3.28%  fell 3.5%, while Jiangxi Copper Co. CN:600362 -5.80%   JIXAY -1.68%  dropped 7.1%, and Zijin Mining Group Co. CN:601899 -2.90%   ZIJMY -1.45%  fell 2.4%.
In Seoul, steel major Posco KR:005490 -1.75%   PKX +0.42%  gave up 2.4%, while Hyundai Steel Co. KR:004020 -1.72%   HYNSY 0.00%  retreated 1.8%.
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By Sarah Turner, MarketWatch
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The situation was similar in Tokyo, where Sumitomo Metal Mining Co. SMMYY 0.00%   JP:5713 -5.56%  dropped 5.6%, Pacific Metals Co. JP:5541 -3.75%   PFMTF -2.70%  fell 3.8%, and JFE Holdings Inc. JP:5411 -4.42%   JFEEF +20.00%  fell 4.4%.
Heavy-machinery suppliers also came under pressure in Japan after U.S. firm Caterpillar Inc. CAT -2.49%  posted a 4% drop in mining- and construction-equipment sales over three months. Read: Caterpillar sales fall in last three months
Hitachi Construction Machinery Co. HTCMY +1.71%   JP:6305 -3.42% traded down 3.7%, and heavyweight Fanuc Corp. JP:6954 -2.19%   FANUY -0.77% moved lower by 1.9%.
Banks and property companies dropped as well in mainland China, with Bank of Communications Co. CN:601328 -4.05%   BCMXY +0.52%   down 4.1% and China Merchants Bank Co. CN:600036 -4.70%   CIHKY -1.48%   down 4.6% while Gemdale Corp. CN:600383 -1.55%  fell 3.7%.
Cheung at Crédit Agricole cited comments from the Chinese premier late Wednesday that home prices have risen at an excessively fast rate and the government has ordered some restrictions on the market.
“Tightening is also likely via monetary policy and will be aimed at withdrawing some liquidity from the money market in order to reduce upward pressure on home and other asset prices,” she said.
Earnings didn’t help the Australian resource sector, with oil and gas extractor and electricity provider Origin Energy Ltd. AU:ORG -8.48% OGFGY -0.05%  dropping 8.5% after the firm posted a larger-than-expected 34% drop in first-half profit and cut its annual earnings guidance. Read: Origin Energy first-half net profit falls 34%
Earnings also weighed in Hong Kong, with footwear firm Belle International Ltd. HK:1880 -16.12%   BELLY +0.31%  dropping 17.8% after announcing it will post only a small increase in 2012 net profit.
Sony Corp. JP:6758 -1.77%   SNE -1.23%  fell 1.6% in Tokyo after it unveiled its newest videogame console, the PlayStation 4, at a New York event but failed to show the actual device, helping stoke rumors that the new console won’t include an optical drive. Read: Sony talks — but doesn’t show — PlayStation 4
Sony’s videogame rival, Nintendo Co. JP:7974 +1.26%   NTDOF +0.48% , saw its shares improve 1.8%.
Among other gainers, Qantas Airways Ltd. AU:QAN +2.79%   QUBSF 0.00%  climbed 2.7% after the Australian carrier posted a first-half profit more than double that of a year earlier, helped by compensation payments for late plane deliveries from Boeing Co. BA +0.17% Read: Qantas profit rises on Boeing compensation payment .
Hong Kong-listed shares of casino operator MGM China Holdings Ltd. HK:2282 +2.72%   MCHVF 0.00%  rose 2.3% as its fourth-quarter revenue rose 2%, despite a wider-than-expected loss for its U.S. parent, MGM Resorts International MGM -1.57%   Read: MGM’s loss widens on massive charges; revenue flat .
Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW.
 
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