News & Reports News Year 2011 April , 2011 Asian Economy Asian shares end lower Tokyo hit by weak earnings

Asian Economy Asian shares end lower Tokyo hit by weak earnings


Asian stocks stumbled Tuesday, in line with a sharp pullback in commodities and a fall in many regional currencies against the U.S. dollar, as investors turned wary ahead of the U.S. Federal Reserve's monetary-policy decision Wednesday.

Tokyo shares were dragged down as weak earnings reports from corporations such as Nintendo mounted the selling pressure, while stocks in Hong Kong were hurt by a decline in resource shares and concerns that Beijing's policy tightening has yet to run its course. Australian markets were closed for a public holiday. Dow Jones Industrial Average futures were 30 points higher in electronic trading. ""A corrective mood has set in and the sharp risk rally appears to be fizzling into the

[U.S.] Federal Open Market Committee... Foremost, there has been a sharp reversal in commodity prices,"" said Sue Trinh, senior currency strategist at RBC Capital Markets. Investors were focused on the Fed's policy decision and Chairman Ben Bernanke's news conference for updates on the central bank's quantitative easing, known as QE2.

The $600 billion asset-purchase program, launched last year to spur the U.S. economy, has boosted liquidity and supported investor risk appetite in global markets, many analysts have said. QE2 is scheduled to end in June. Citigroup strategists wrote in a note to clients Tuesday that for Asia, the biggest threat from the end of QE2 is a stronger U.S. dollar.

In the past, ""when the U.S. dollar has been strong, Asian equities have been weak,"" they said. Several resource-sector stocks fell as gold and silver, crude oil and base metals pulled back on caution ahead of the FOMC decision. Gold miner Zijin Mining Group gave up 1.2%, PetroChina lost 1.9% and Jiangxi Copper shed 0.4% in Hong Kong; in Shanghai, they fell 3%, 0.5% and 2.7%, respectively.

Elsewhere, Japan Petroleum Exploration dropped 1.4% and Korea Zinc tumbled 6.2%, while base-metals producer Sterlite Industries India was down 1.6% in afternoon trading. Shares of Minmetals Resources Ltd. tumbled 9.1% in Hong Kong after the company said it had decided not to pursue its $6.5 billion takeover bid for Equinox Minerals Ltd. after being outbid Monday by Barrick Gold Corp.

Spot gold was recently at $1,504.20 a troy ounce, down $3.20 from its New York settlement Monday. June Nymex crude-oil futures were down 33 cents at $111.95 a barrel on Globex. The drop in Hong Kong came as trading resumed after a four-day weekend. Several Chinese property developers lost ground on worries that Beijing may launch more measures to cool the housing market.

China Overseas Land & Investment fell 2.2% and Agile Property Holdings dropped 1.9%. Property shares on Chinese bourses, after dropping in the previous two sessions on such concerns, were mixed: Gemdale fell 0.9% but China Vanke rose 0.4%. Chinese stocks ended lower, however, with sentiment dented by a report from the state-run China Securities Journal Tuesday that the authorities had finished initial rules for an international board, part of Bejing's efforts to internationalize its currency by allowing foreign firms to issue shares denominated in the yuan and help Shanghai become a global financial hub.

There's concern it may divert funds away from the main board. Moreover, ""investors are also concerned the international board will drag down the valuation of the A shares once it is launched,"" said Wang Fan, an analyst with Donghai Securities. The ill effects of the March 11 natural disasters and weak earnings from Japan's Nintendo and Nidec drove the Tokyo market sharply lower.

These early results set a somber tone for the earnings season, said Tatsunori Kawai, chief strategist with Securities. ""These will be the benchmarks for other manufacturers, and investors are adjusting their expectations downwards,"" he said. Nidec fell 2.1% after the maker of precision motors for hard drives and automotive systems forecast a fall in operating profit for the current fiscal year.

Game-related stocks were also lower after Nintendo said profit fell for a second year. Nintendo lost 1.3%, while rival Capcom fell 1.5%. Sony, both a game maker and a major exporter, lost 2.1%. Auto makers lost ground after credit-rating firm Standard & Poor's cut its outlook on quake-hit Japanese auto makers Monday.

The lowered outlook came after domestic automobile production plummeted by more than half in March due to supply-chain disruptions. Auto makers are now expected to provide grim forecasts for the current fiscal year, which started this month. Toyota fell 2.4% and Honda dropped 1.6%. Elsewhere, Philippine stocks fell 0.6%, Taiwan's Taiex ended little changed, New Zealand's NZX 50 fell 0.2%, Singapore's Straits Times Index gave up 0.4%, Indonesian shares fell 0.4% and Thailand's SET dropped 0.8%. Foreign-exchange markets were marked by volatility in late trade, ahead of Wednesday's Federal Reserve policy meeting and Fed chief Bernanke's first-ever post-meeting news conference.

The euro was recently fetching $1.4620 compared with $1.4579 late Monday in New York, rebounding sharply from the day's lows. It was also buying 119.62 yen versus Y119.25. The dollar was at Y81.69, compared with Y81.81. Mark Smith, an interest-rates strategist at ANZ Bank in Wellington, said turning around the weak U.S. dollar requires both fiscal and monetary steps--""and we'd emphasize the importance of the former, which is overlooked."" Until they happen, any potential U.S. dollar rally will likely be met by selling, he added.