Hong Kong: Asian shares were flat on Friday, ending the month with losses on continued investor concern over the world economy and the financial system, while safety bids such as dollar buying erased some of their recent gains.
The advances in stock markets at the start of the year unraveled further in February as the MSCI index of Asian shares outside Japan headed for a 5% monthly fall, having hit at one point their lowest since the five-year lows in late November.
Risk aversion in February was reflected in the surge of the dollar, which is on track to its biggest monthly gain against the yen since 1995, and a rally in gold that took it past the $1,000 an ounce barrier to approach a March 2008 record.
Weak economic data in Asia, including double digit export drops and contractions in gross domestic product, also pummelled currencies such as the South Korean won.
“The drop in exports in the region continues to take a terrible toll on GDP and the region’s economies will continue to decelerate for some months to come,” said Calyon in a note to clients on Friday.
The MSCI index of Asia-Pacific stocks outside Japan was 0.3% lower flat as of 0335 GMT. It is now about 10% above the five-year low hit on 21 November.
The index has lost about 12% for the year so far, as investors find it hard to be optimistic about the economy, despite government stimulus such as the $787 billion US economic rescue package approved this month.
Data on Thursday showed the number of US workers continuing to receive state jobless aid jumped to record high in mid-February and new orders for long-lasting manufactured goods reaching a six-year low in January.
In Japan, production at factories fell by a record 10% last month, and new jobs proved harder to find, showing the country’s worst recession since World War Two is deepening, according to reports on Friday
The financial system also continues to reel, as banks have trillions of dollars of potential losses on their books after the collapse of the US property market triggered a credit crunch, leading to a full-blown financial crisis and worldwide recession.
Data on Thursday showed the number of problem banks on a US watchlist jumped in the fourth quarter, while Royal Bank of Scotland reported the biggest corporate loss in British history.
Some of Asia’s big stock indexes gained on Friday, though analysts were hesitant about whether that would be sustained.
“The volume is still terrible so it’s hard to get a real feel. But people are somewhat reluctant to be in the market and exposed to equities and that may continue for some time,” said Richard Herring, a director with stockbrokers Burrell & Co in Australia.
The Nikkei average gained 1.3% after flirting with 26-year lows this month.
South Korea’s stock index rose 1.4%, while markets in Australia, Hong Kong and Taiwan gained less that 1% each.
Shares in Shanghai and Singapore fell.
The dollar fell against the Japanese yen as investors booked profits from a recent rally. The US currency has benefitted from an at times intense flight to safety.
President Barack Obama forecast on Thursday a $1.75 trillion deficit for the 2009 fiscal year, the biggest US deficit since World War Two in a budget, underlining the heavy blow the deep recession has dealt to the country’s finances.
The yen rose 0.7% from the previous day’s US trade to 97.85 to the dollar after on Thursday hitting a 3-“ month low against the US currency, as investors who had bet the Japanese unit would strengthen unwound long yen positions.
The euro dropped 1% against the Japanese currency to 124.25, falling from a seven-week peak of 126.09 yen struck on EBS the previous day.
Spot gold, another strong performer this month, softened about $5 to $939.50 an ounce after on Thursday falling to a two-week low. Prices of the metal had hit an 11-month high above $1,000 last week.
Oil retreated 61 cents to $44.61 a barrel after on Thursday jumping more than 6% on expectations oil-producing cartel will cut output again and due to signs of a rebound in gasoline demand in the United States.