Asia stocks soften ahead of Europe summit
Japanese and Hong Kong shares dipped in Asia on Monday, while South Korean and Australian stocks saw much deeper losses ahead of a key European summit later in the week.
Hong Kong’s Hang Seng Index HK:HSI -.00 percent slipped 0.1 percent while the Shanghai Composite index CN:000001 -0.66 percent reopened after a long weekend to trade down 0.6 percent.
Japan’s Nikkei Stock Average JP:100000018 -0.15 percent edged 0.2 percent lower after trading in both directions, and Australia’s S&P/ASX 200 index AU:XJO -1.14 percent lost 1.1 percent and South Korea’s Kospi KR:SEU -1.70 percent fell 1.6 percent.
US shares got a boost Friday after the European Central Bank announced it would further ease rules on the collateral banks can use in order to secure central-bank funding.
The ECB move came with Spain due to formally request aid for its banking sector Monday, and ahead of this week’s crucial two-day European Union leaders summit, due to start Thursday.
Ahead of the meeting, reports said over the weekend that Greece’s prime minister Antonis Samaras and Finance minister Vassilis Rapanos will not attend the summit due to health issues.
Greece, which will reportedly be represented by its foreign minister and acting finance minister, will present a plan at the summit that includes tax cuts and a request for more time to lower its debt levels, according to Reuters.
“Attention turns to yet another EU Summit. There have been many such events over the last two years, each of which has failed to deliver anything other than disappointment and confusion. There is absolutely no reason to expect this one to be any different,” said Cameron Peacock at IG Markets.
Commodities weigh
A raft of weak manufacturing indicators last week had raised concerns about slowing global economic growth as Europe grapples with its debt crisis, pushing commodity futures lower. Monday morning in Asia, benchmark US oil futures remained below $80 a barrel, while gold was below $1,600.
Australian miners weakened, with mineral giant BHP Billiton Ltd AU:BHP -1.78 percent BHP +0.27 percent down 1.8 percent, and rival Rio Tinto Ltd AU:RIO -1.27 percent RIO +1.48 percent lower by 1.1 percent.
Resource firms also fell in Hong Kong. China Coal Energy Co. HK:1898 -3.10 percent. CCOZY +3.15 percent shed 2.6 percent, Cnooc Ltd HK:883 -0.56 percent CEO -0.34 percent dropped 1.1 percent, and Aluminum Corp. of China Ltd HK:2600 -2.13 percent ACH +1.05 percent fell 1.8 percent.
“Almost all the investors we met are currently underweighting the metal and mining sector, and they also believe it is too early to bottom-fish from here,” said Deutsche Bank’s Hong Kong mining analysts.
“We might need to wait until mid-Q3 to see whether it is sensible to increase weights in deep cyclicals such as the metal and mining sector,” they said.
Japanese oil companies dragged on the Nikkei Average, including Inpex Corp. JP:1605 -3.54 percent IPXHY -0.99 percent, down 3.3 percent, and JX Holdings Inc. JP:5020 -0.73 percent JXHGF +8.16 percent, slipping 0.5 percent.
NEC Corp. JP:6701 -3.15 percent NIPNF -6.25 percent dropped 3.2 percent after a Kyodo News report that tax regulators found the firm concealed income in 2007-2010.
Korean exporters losing ground on Monday included Samsung Electronics Co. SSNLF -0.30 percent, down 4 percent, and Hyundai Motor Co. HYMTF +0.51 percent, which fell 2.1 percent.
The Bank of Korea will likely cut its economic growth and inflation forecasts, central bank Gov. Kim Choong-soo said in a Dow Jones Newswires interview Saturday.
Gainers
Some Japanese exporters managed to gain ground, as the dollar and euro each traded higher against the Japanese yen compared to the end of last week.
“One thing that’s been helpful has been the dollar/yen move,” said Naomi Fink, strategist at Jefferies speaking about the recent performance for the Japanese share market, which managed to rise last week even though other markets lost ground.
On Monday, the US dollar USDJPY -0.1921 percent remained above JPY 80, having broken above the key level after spending much of the past month lower.
Additionally, Fink said that while Japan isn’t immune from Europe’s debt troubles, “the rest of Asia has much stronger direct trade and financial exposure to Europe” than Japan does.
Among major exporter names trading higher, Fuji Heavy Industries Ltd JP:7270 +0.79 percent FUJHF +6.16 percent climbed 0.9 percent, while Toyota Motor Corp. JP:7203 +0.65 percent TM +0.71 percent advanced 0.5 percent.
Panasonic Corp. JP:6752 +2.39 percent PC +3.31 percent improved by 2.6 percent after Citigroup raised its rating on the shares from neutral to buy.
On the move higher in Hong Kong, Evergrande Real Estate Group Ltd HK:3333 +4.18 percent EGRNF -6.14 percent jumped 3.9 percent, recouping some more of last week’s steep losses after several brokerages voiced skepticism over fraud allegations against Evergrande from stock-commentary website Citron.
Other property stocks helping to curb losses in Hong Kong included China Overseas Land & Investment Ltd HK:688 +3.22 percent CAOVF +3.11 percent, up 2.5 percent, and China Resources Land Ltd HK:1109 0.00 percent CRBJF +12.14 percent, up 1.5 percent. -By Sarah Turner
Category: FinanceAsia
