Hong Kong: Asian shares and commodities slipped on Tuesday in a partial reversal of the previous day’s solid gains, but many investors stuck to the sidelines awaiting more clues on whether the global economic recovery is picking up steam.
The Shanghai Composite index tumbled more than 5%, before halving those losses, as cautious remarks from Chinese Premier Wen Jiabao on Monday stirred worries about the economic rebound in the country that has helped fuel recovery hopes in much of Asia.
The latest slide in Shanghai was mainly driven by investors taking advantage of the 7.5% bounce over the previous three trading days to pull funds out, hitting bank shares the hardest. But the fallout from Chinese losses on other global markets was limited, unlike slides seen last week. “Investors were skittish and looking for trouble anywhere so they could have an excuse to take profit because the market has had a good run,” said Howard Gorges, vice-chairman at South China Brokerage Co. Ltd.
Market reacts: A stock price monitor in Shanghai, China. The Shanghai Composite index tumbled more than 5%, before halving those losses, after cautious remarks from Chinese Premier Wen Jiabao on Monday. Eugene Hoshiko / AP
Investors around Asia showed little reaction to news that the White House will tap US Federal Reserve chairman Ben Bernanke for another term at the helm of the central bank.
Analysts said the decision had been widely expected, but still removed some uncertainty about the outlook for US monetary policy and was neutral for US assets and the dollar.
Some analysts had said a decision not to reappoint Bernanke would have been a negative by risking politicizing the Fed chief post at a time when investors are worried about record US deficits.
“When you look at responses to last year’s financial crisis, bold action was taken and the market reacted to that favourably,” said Takahide Nagasaki, chief FX strategist at Daiwa Securities SMBC Co. Ltd in Tokyo.
“I don’t think there will be any major impact, but it should be positive for stock and bond markets in the sense that an element of uncertainty has been removed.”
The MSCI index of Asia-Pacific shares outside Japan dropped about 0.6%, with consumer discretionary and healthcare stocks the bigger decliners. The index is still up about 47% for the year and not far from an 11-month high struck earlier in the month.
Technology shares held up the best on hopes that frail consumer demand is picking up heading into the key US back-to-school and holiday shopping seasons.
South Korea’s LG Display Co. Ltd, the world’s No. 2 LCD panel maker, recovered from early losses to rise 2.6% after confirming it had signed a non-binding agreement to build an LCD plant with the city of Guangzhou, China. The Kospi benchmark fell 0.7%.
Share trading volumes were very light for a second day running, leading to exaggerated moves across markets.
Japan’s Nikkei average shed 0.8% after jumping 3.4% the previous day, its biggest one-day gain in three months. Turnover on the Tokyo Stock Exchange’s first section slowed from the previous day to the lowest in five weeks.
Foreign investors, who have been increasingly shoving funds back into Japanese shares in the past few weeks, are keeping an eye on Japan’s 30 August general election.
With many expecting the opposition Democratic Party to win and end a half-century of nearly unbroken rule by the ruling coalition, foreign buying of Japanese shares on a rolling one-month moving average has hit its highest levels since mid-2007.
Shares in Hong Kong, Taipei and Sydney lost less than 0.5%, while the main Mumbai and Singapore stock indexes eked out marginal gains.
The dollar was little changed against a basket of currencies but the US currency fell as low as 93.80 yen (Rs47.84) in early trade, as the yen was the main beneficiary of the pullback in risk demand. In early European trade, the pair traded at 94.12 yen, down 0.4% on the day. The Australian dollar, the highest-yielding of major currencies, dipped 0.5% to $0.8336 (Rs40.68) and dropped about 1% to 78.25 yen.
“The lack of upward momentum in equities and risky currencies may reflect a degree of fatigue and simply a lot of the good news is in the price,” said a trader at a European bank in Tokyo. “It is pretty clear monetary policy will be supportive with little risk of genuine policy tightening for some time in the major economies.”
Oil fell below $74 a barrel while gold ticked higher, recovering some of the previous session’s losses, as a dip in risk appetite boosted interest in the metal as an alternative to nominally riskier assets such as equities and industrial commodities.
Benchmark 10-year treasury yields dipped a basis point to 3.464%.
Lu Jianxin and Edmund Klamann in Shanghai and Charlotte Cooper in Tokyo contributed to this story.