Tue, Sep 22, 2015 - Page 14 News List

Asian stocks slide on growth concern after Fed comments


An investor surveys stock information at a brokerage in Beijing yesterday.

Photo: Reuters

Asian stocks yesterday declined amid concern global growth is faltering after US Federal Reserve officials said that a US interest-rate increase is still warranted this year. Markets in Japan are closed.

BHP Billiton Ltd sank 2.5 percent in Sydney as commodities companies led losses across the region. Esprit Holdings Ltd sank 6.2 percent in Hong Kong, after shareholder activist David Webb said the Financial Reporting Council might be investigating the company.

China Railway Group Ltd (中國中鐵) surged in Shanghai after saying it plans to inject manufacturing units into China Railway Erju Co (中國中鐵二局) in exchange for assets.

The MSCI Asia Pacific Excluding Japan Index lost 1.8 percent to 404.83 as of 4:36pm in Hong Kong. Three US policymakers at the weekend separately explained their rationale for supporting a rate increase at one of the Fed’s two remaining meetings of this year, citing declines in unemployment and other gains in the US economy that should outweigh headwinds from slower growth abroad and turbulent financial markets.

“The key thing is that the markets are looking for global growth and we’re not seeing any,” Allianz Global Investors chief investment officer for Asia Pacific Raymond Chan said.

“It’s the US and China driving sentiment — it’s pretty bad. I’d prefer if there was a US rate rise once and for all, and that would clear away all the uncertainty. Volatility is going to continue to exist for a long while,” Chan said.

Hong Kong’s Hang Seng Index declined 0.8 percent and the TAIEX lost 1.83 percent. The Shanghai Composite Index gained 1.9 percent.

However, China’s economy is not as weak as it might look, according to a private survey.

“No collapse is nigh,” in the aftermath of the stock market plunge and currency devaluation, according to the third-quarter China Beige Book survey published by New York-based CBB International. Capital expenditure rebounded slightly in the period and the services sector showed strength, the report said.

Australia’s S&P/ASX 200 Index fell 2 percent and South Korea’s KOSPI retreated 1.6 percent. New Zealand’s S&P/NZX 50 Index slipped 0.5 percent and India’s S&P BSE SENSEX decreased 0.3 percent.

E-mini futures on the S&P 500 slipped 0.1 percent yesterday. The Standard & Poor’s 500 Index lost 1.6 percent on Friday.

Traders say the Fed is most likely to postpone liftoff until next year, based on the pricing of federal funds futures contracts.

Investors are to hear directly from Fed Chair Janet Yellen on Thursday, when she delivers a speech in Amherst, Massachusetts.

San Francisco Fed President John Williams, a policy centrist who has worked closely with Yellen, on Sunday said that “in my mind, it was a close call” to delay a rate increase at last week’s Federal Open Market Committee (FOMC) meeting.

Williams’ comments on Fox News echoed remarks he made the day before and chimed with the reasoning of St Louis Fed President James Bullard and Richmond Fed President Jeffrey Lacker. Both weighed in on Saturday over the FOMC’s vote to leave rates near zero.

“We expect to remain bearish,” RMG Wealth Management LLP chief investment officer Stewart Richardson said.

“The Fed seems to be coming in for more criticism from all sides, and with markets falling after a dovish meeting, we believe that their credibility is now being openly questioned. We continue to believe that long-term investors should be holding a lot of cash at this point in the cycle,” he said.

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