Bank of China

Global indicators weigh on markets

PUBLISHED : Wednesday, 11 April, 2012, 12:00am
UPDATED : Wednesday, 11 April, 2012, 12:00am

Disappointing United States job data and a rise in China's inflation weighed on Asian stock markets yesterday, although the mainland's managed to gain ground, lifted by hopes of possible monetary easing policies in coming months.

MSCI Asia Pacific ex-Japan Index stocks slipped 0.6 per cent, and the benchmark Hang Seng Index fell 1.15 per cent on its first day of trading after the Easter break.

Li & Fung, which manages supply chains for global retailers, was the worst-performing blue-chip stock, losing 4.41 per cent to close at HK$16.46 on renewed worries of a slowdown in exports because of weaker than expected job growth in the US.

Cheung Kong, the second-largest developer in Hong Kong, was the second worst performing blue chip. It dropped 3.09 per cent to HK$98.75 after Financial Secretary John Tsang Chun-wah warned of a possible property price bubble on Sunday, and urged buyers to be cautious in his official blog.

Property prices had risen 74 per cent since early 2009 and are 5 per cent higher than in 1997, he wrote.

Tsang's speech hit shares of Cheung Kong, whose chairman Li Ka-shing, the richest man in Asia, only last month ruled out a big fall in home prices.

H shares also underperformed, dragging down the market. The Hang Seng China Enterprises Index closed 1.38 per cent lower.

The drop was led by power companies. China Longyuan Power fell 4.1 per cent to HK$6.31. Electricity producer Huaneng Power International slid 3.36 per cent to HK$4.32.

Mainland banking stocks continued to suffer from Premier Wen Jiabao's criticism of state-owned banks' 'monopoly', with Industrial and Commercial Bank of China losing 0.4 per cent to HK$5.01 and China Construction Bank slipping 0.67 per cent to HK$5.96. They were among the top five most actively traded stocks on the main board.

The Shanghai Composite Index, however, rose 0.88 per cent as investors digested conflicting economic data that sent mixed signals to the market.

The unexpected trade surplus, caused by a slowdown in mainland imports, and the bankruptcy filing of mainland developer Hangzhou Glory Real Estate, raised hopes for further monetary easing, but a higher than expected 3.6 per cent rise in the consumer price index will make it harder for the central bank to ease.

Jing Ulrich, JPMorgan's chairman of global markets in China, said the near-term prospects of A shares would hinge on the domestic economy and on the pace of monetary easing.

She also played down the prospects of a substantial injection of funds into the A-share market from the recent expansion of the foreign direct investment scheme, with an extra US$50 billion in quotas being awarded for foreign institutional investors to invest foreign currency in mainland stock and bond markets.

Arthur Kwong, the head of Asia-Pacific equities at BNP Paribas, predicted volatility in Asian stock markets in the second quarter, amid uncertainty over next moves by central banks worldwide, ranging from possible loosening by the People's Bank of China to possible further quantitative easing by the US Federal Reserve, as well as other central banks in Asia.

For example, the Nikkei-225 Index surged at one point yesterday on speculation of loosening by the Bank of Japan, partly in reaction to massive lay-offs by consumer electronics giant Sony, but the index closed 0.09 per cent lower when the central bank ruled out any easing.

Asian markets would probably not see a substantial increase at the end of the June quarter, Kwong said, adding that international institutional investors would remain risk-averse until the global outlook stabilises.


The mainland's increase in inflation in March from a year earlier