Asians stocks closed mixed on Wednesday with a rally on Wall Street overnight failing to inspire investors, who remain worried over the state of the US economy.
Improved US manufacturing figures and the prospect of an interest rate cut in the world’s largest economy underpinned early buying, but profit-taking emerged later in the day.
Subprime mortgage fears, or home loans made to risky borrowers when interest rates were much lower in the US, again haunted equities as many people believe the worst is not yet over.
Further insights into the US economy and the impact from subprime loans were expected to be contained in more data to be released over the coming days and this also contributed to a broader flat tone to trade.
Tokyo was by far the worst hit with a 1.6% tumble on a potential US credit crunch. Seoul shed 0.5% as also Sydney after its central bank kept interest rates on hold.
On Wednesday, the Bombay Stock Exchange shed 0.12%.
A sharp fall in Japan encouraged profit-taking elsewhere, resulting in many markets closing off their highs, including Hong Kong, where the benchmark rose 0.77% and still managed a record close.
Taipei and Jakarta ended flat while Wellington was up a modest 0.11%. Shanghai gained 0.31%, Bangkok rose 0.45% and Manila was up 0.91 %, while Kuala Lumpur rose 1.1% and Singapore stocks soared 2%.
Japanese share prices skidded lower for a third straight day as investors remained nervous about the US economy because of the recent turmoil.
Dealers said an early rally sparked by overnight gains on Wall Street faded as the market awaited fresh leads on the fallout of problems in the US mortgage sector.
A stronger yen also weighed on exporter shares. The Nikkei 225 index closed at 262.02 points at 16,158.45. Turnover rose to 1.81 billion shares from 1.46 billion shares on Tuesday.
Worries that the subprime troubles will hurt the broader US economy are making investors quick to pocket profits on any market gains, dealers said.
Data overnight showed a slowdown in US manufacturing growth in August and construction spending in July.
“Market players initially reacted to overnight gains in US stocks and a softer yen, but they are still seeking clearer signs of how the subprime loan problems will affect the US economy,” said Hiroichi Nishi, an equities information manager at Nikko Cordial Securities Inc.
In particular, they are waiting for further US data due this week, including key August job numbers on Friday.
A strong performance by Sony Corp. limited the market’s losses. Shares in the electronics giant rose ¥130 to ¥5,740 after the group said it would list its financial arm next month in hopes of raising almost $3 billion (Rs12,237 crore) to reinvest in its core electronics business. Hitachi Ltd slipped ¥5 to ¥739.
In Hong Kong, share prices closed above 24,000 points for the first time, on strong Wall Street gains, expectations of lower interest rates and hopes for further mainland cash.
The index hit a new all-time high in the morning as it breezed past the 24,200 mark but the gains were pared as some investors locked in profits amid fears that the market may be at overbought levels.
A sharp drop on the Japanese bourse also gave rise to profit-taking pressure in the afternoon, but the index still managed to end at a new closing record. Property stocks gained on hopes that the US Federal Reserve will cut its key rate this month, which could prompt local banks to lower their lending rates.
Interest rate movements in Hong Kong tend to follow those in the US because of Hong Kong dollar’s peg to the US currency.
The Hang Seng Index closed up 183.10 at 24,069.17.
“Despite the volatility, overall sentiment remained positive because of a host of positive factors, including Wall Street’s gains and expectations of a Fed rate cut,” Castor Pang, strategist at Sun Hung Kai Financial Group said. “Optimism over a rate cut fuelled interest in rate-sensitive local property and banking counters and helped the (benchmark) index close at a new record high.”
Chinese share prices closed 0.31% up as energy and metals rebounded from recent weakness. Dealers said metals and energy stocks gained after a report that Shanghai Baosteel Group Corp., China’s largest steel producer, would expand its capacity by nearly four times over the next five years.
The Shanghai Composite Index closed at 5,310.72, up 16.67, on a turnover of 150.82 billion yuan ($19.85 billion).
Baosteel chairman Xu Lejiang wants the group to ramp up its steel production to 80 million tonnes (mt), from more than 20mt by 2012, the China Business News reported.
Banks, however, remained weak as investors awaited details on China’s programme to allow mainland individuals to invest directly overseas.
Share prices in Taiwan closed little changed, with early gains made on Wall Street’s rise and hopes of a US interest rate cut giving way to profit-taking.
The weighted index closed down 9.13 points at 8,913.85. Turnover was Taiwan $135.88 billion ($4.12 billion).
Kevin Chung, manager at Jih Sun Securities Investment Consulting Co., said technical pressure prevented investors from chasing prices much higher. “Wall Street’s overnight strength was apparently welcomed here, and the reported tax cut plan also raised hopes for more market-friendly measures from the government” ahead of the presidential election next year, he said.
Chung said expectations that the index would hit a barrier at around 9,000 affected on sentiment.
“Profit-taking surfaced again when investors refrained from any further position-building,” he added.
South Korean share prices closed 0.5% lower as investors turned cautious ahead of the release of further key US data later this week. The Korean Composite Stock Price Index closed on 9.15 at 1,865.59. Volume was 374 million shares worth $5.9 billion.
“Investors decided to take a break today as scheduled US data will likely give them clearer signs of any future move (on rates) by the Federal Reserve,” said Kyobo Securities Co. Ltd analyst Lee Woo-Hyun.
Australian share prices closed down 0.5%, ending four days of gains and dragged down by weakness in banks amid concerns about credit markets.
Dealers said falls in the big banks and a drop in mining giant BHP Billiton Ltd weighed heavily on the index, but retailers Coles Group Ltd and Wesfarmers Ltd both posted strong gains after Coles approved an enhanced takeover bid by Wesfarmers.
Although the central Reserve Bank of Australia left interest rates on hold at 6.50% on Wednesday, there also remained concerns about a possible new rate rise before year-end.
“We have got most of the negative pressure coming from the finance sector,” said David Land, an analyst with CMC Markets Asia Pacific.
There’s still some concern about the wider impact of the subprime mortgage problems and that’s continuing to weigh on the market, said Ric Klusman, head of institutional trading at Aequs Securities Pty Ltd. Share prices closed 2.0% higher, encouraged by gains on Wall Street where positive economic data raised hopes of an interest rate cut.
Dealers said banks and blue chips were back in focus after recent heavy selling on fears of a global credit crunch. The Straits Times index closed up 69.02 at 3,445.08 on a volume of 2.09 billion shares worth $1.38 billion.
“I guess there are minor signs of stability in the US market with continued gains,” said UOB Kay Hian Pte Ltd’s dealing director Chan Tuck Sing. “At least the market is less nervous compared to a few weeks back but nevertheless investors will not be inclined to take too big a step, perhaps until 18 September,” the date of the next US Federal Reserve meeting.
Malaysian share prices closed up 1.1% on optimism a government budget will include positive measures for the corporate sector and taxpaying public.
Dealers said Prime Minister Abdullah Ahmad Badawi is expected to unveil a budget designed to spur domestic demand. The composite index rose 14.18 to 1,297.93 on volume of 1.02 billion shares valued at 1.77 billion ringgit ($506 million).
In Bangkok, Thai share prices closed 0.45% higher following overnight rallies on Wall Street. Dealers said investors were keeping a close eye on the appointment of a new Thai army chief to replace retiring general Sonthi Boonyaratglin, who led the bloodless coup last year.