Hong Kong: Asian stocks retreated on Thursday, with some investors booking profits after solid gains in the second quarter sparked by signs the global economy is starting to recover.
Asian stocks outside Japan are up nearly 30% so far in the April-June quarter, poised for their biggest quarterly gain in 16 years, led by a surge in Hong Kong’s Hang Seng and India’s benchmark Sensex index.
Analysts remain divided about whether consumer spending in major economies will kick in later this year and help fuel the pick up in growth.
But the renewed confidence among portfolio managers has emboldened them to scoop up shares battered by the crisis last year as hedge funds were forced to dump assets and the global economy skidded into its deepest recession in decades.
A monthly poll from Bank of America-Merrill Lynch showed global fund managers have moved to overweight stocks for the first time since December 2007, during the early stages of the crisis that began nearly two years ago.
The poll also found global growth expectations reaching their highest level in six years. But a peaking out of Chinese growth expectations suggested that outperformance of global emerging markets versus developed markets has come to a near-term end, the survey said.
Japan’s Nikkei average shed 1.4% and has lost nearly 5% from an eight-month high struck last week. But for the April-June quarter, the first of Japan’s business year, the Nikkei is still up 19%, which would be its largest quarterly rise since 1995.
“It seems like a pull-back phase. People who want to take profits are starting to appear,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd in Tokyo.
The MSCI index of Asia-Pacific shares outside Japan dropped more than 1%. Shares in Hong Kong, India and Singapore fell more than 1.5%, while South Korea shed 1.1% and Taiwan dipped 0.8%.
Shanghai bucked the regional downtrend to close 1.6% higher led by coal and financial shares as optimism grew over prospects for economic recovery and concerns eased about the likely impact of an imminent restart of initial public offerings.
Asian markets fared worse than the 0.1% dip in the US S&P 500 the previous day.
“The global economy will continue to heal itself, albeit at a gradual pace. The current sell-off in risky assets is inconsistent with the gradually improving economic fundamentals,” said Stephen Jen, managing director of macroeconomics and currencies at BlueGold Capital Management Llp., a London-based hedge fund.
The dollar rose slightly as measured against a basket of major currencies.?Wednesday’s subdued US inflation data had dented the dollar earlier in the session as it dampened speculation of a US interest rate hike by the end of the year.
Oil rose further above $71 (Rs3,415.10) a barrel, buoyed by a surprisingly big drop in US crude inventories and ongoing demand from China. Gold edged below $937 an ounce from above $938 struck overnight in New York. Government bonds edged up on the dip in most stock markets, extending a rebound from a sell-off sparked by the sharp slide in US treasurys earlier in the month on further signs of economic improvement and a flurry of mortgage portfolio hedging against higher rates.
Korean bond futures rose 27 ticks to 109.22, recovering from a seven-month low. Ten-year Japanese government bond yields dipped half a basis point to 1.455%.
Masayuki Kitano in Tokyo contributed to this story