Sun, Jul 10, 2016 - Page 14 News List

Asian equities slide on robust Japanese yen

Bloomberg

Asian stocks fell, capping a weekly decline, as a stronger yen weighed on Japanese shares and investors waited for a US jobs report to assess its implications for monetary policy.

The MSCI Asia Pacific Index dropped 0.5 percent to 128.25, taking its loss since the beginning of the month to 1.1 percent, as concern over the fallout from the UK’s vote to leave the EU returned, boosting haven assets such as Japan’s currency. Energy shares declined as crude fell to the lowest in almost two months on renewed fears of oversupply.

Taiwan shut financial markets on Friday as Typhoon Nepartak hit the nation’s eastern coast, killing at least three people and forcing thousands to evacuate. The TAIEX closed up 0.8 percent on Thursday at 8,640.91. It was down 1.1 percent from 8,738.24 on Friday last week.

Japan’s TOPIX reversed gains on Friday to fall 1.3 percent, extending its weekly decline to 3.6 percent. The TOPIX is down 22 percent this year, in line with the yen’s 19 percent surge against the US dollar.

Pressure is building on the Bank of Japan to respond, Nicholas Smith, a Tokyo-based strategist at CLSA Ltd, told Bloomberg TV.

“The main problem for Japanese equities at this stage is earnings growth and that’s negatively impacted by the strength we’ve seen in the yen,” Adrian Zuercher, head of Asia asset allocation at the private banking arm of UBS AG, told Bloomberg TV in Hong Kong. “As long as we move forward at these levels with the yen, we still have headwinds in terms of earnings. The UK referendum has ushered in a period of heightened uncertainty.”

Japanese voters head to the polls today for an upper-house election that Japanese Prime Minister Shinzo Abe has billed as a gauge of backing for his economic policies. Voting starts at 7am and closes at 8pm, with official results trickling out later in the evening.

“Global risk appetite is absolutely in the tank at the moment,” Smith said. “There’s very little they can do to weaken the yen further. We’ve had our nasty shock from Brexit and one would assume that the effect of the Brexit scare is going to lessen over time, but I wouldn’t put a lot of hope in the yen weakening much from here.”

Nintendo surged 8.9 percent, the largest increase on the Asia Pacific index, after the firm’s new mobile-game app, Pokemon Go, climbed to the top of the free-to-use charts for Apple Inc in the US and Australia. Asahi Glass Co slumped 8.2 percent after a report in the Nikkei Shimbun that the company’s first-half sales would be about ¥630 billion (US$6.3 billion).

Political gridlock in Australia is dragging on with ballot papers still being counted. Australian Prime Minister Malcolm Turnbull’s Liberal-National coalition is increasingly confident it won last weekend’s election as vote counting indicates it has pulled ahead of the opposition Labor party. The S&P/ASX 200 Index closed up 0.1 percent on Friday.

Singapore’s Straits Times Index fell 0.6 percent, as did South Korea’s KOSPI. New Zealand’s S&P/NZX 50 Index retreated 0.1 percent, Hong Kong’s Hang Seng Index slid 0.7 percent and the Shanghai Composite Index lost 1 percent.

E-mini futures on the S&P 500 Index rose 0.2 percent, after the underlying equity measure slipped 0.1 percent on Thursday, led by energy shares.

It has been a turbulent year for investors in the Asia-Pacific region. The regional index began the year with a 14 percent slump through a February low on concern about a slowdown in China and the falling price of oil, and amid prospects for a US rate rise. The measure then rallied 19 percent through this year’s peak in April before retreating again. It is down 2.9 percent this year.

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