‘Asian Markets Lacking Conviction’ as Nikkei is Flat

on Nov 17, 2016
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Thursday’s Asia session was a tale of market participants waiting for today’s Fed boss Janet Yellen’s testimony to congress later today. Clues as to the direction U.S. monetary policy will take under President-elect Donald Trump will be examined. Markets have already priced in a December rate hike at over 90%. However, indications as to whether next year’s pace of further increases to the base interest rate will be cranked up Trump indicates he will follow through on his pre-election promises to increase spending and reduce taxes. This course of action would be expected to turbo charge inflation which the Fed might feel obliged to head off with a quickening of rate hikes.

While exporters, particularly Japanese exporters, are benefitting from the stronger dollar, emerging Asian markets are suffering from capital outflows as investors anticipate improved returns in the U.S.
The **Nikkei 225** finished today’s session flat as the dollar approached 110 yen for the first time since June. The best performing sectors today were Transportation and Power. The day’s biggest winner was chemicals group and silicon manufacturer Tokuyama Corp, which gained 4.5%. The day’s other star performers were Kajima Corp, up 3.84% and Tokyo Tatemono which registered a 3% uplift. Kajima Corp is a construction company specialised in large infrastructure projects and Tatemono a real estate investment and management company with a mixed commercial, residential and leisure portfolio.

Sony Financial Holdings was Thursday’s biggest casualty, down 4%. The insurance, banking and financial services group has recently suffered from analyst downgrades. Mitsui Mining and Smelting Co lost 3.65% and Isetan Mitsukoshi Holdings, which owns department stores, was down 3.29%.
In Australia the **ASX 200** finished marginally up with a 0.2% gain. The day had started off on the wrong foot with the ASX as much as 0.8% down after Wall Street dropped off the record highs touched following Trump’s election victory. Telecommunications and media giant Telstra was the biggest winner, up 2.5%.

The company announced higher returns which will result from $10 billion that it will receive from government-owned NBN (national broadband network), a $3 billion network upgrade and plans to cut fixed costs by more than $1 billion over 5 years. The company’s share price is also benefitting from a recovery in bond markets. Telstra is considered a bond-markets proxy and had been sold off after Trump’s election on fears his policies would lead to a significant increase in inflation.
Other bond-proxies also did well with Transurban up 2.5%, Duet Group 2.3% and Westfield 1.4%. Energy stocks took the hardest hit yesterday as oil price dropped back following recent gains and banks were also sold, mirroring movements on Wall Street during Wednesday trading in the U.S. markets.
The **Hang Seng** index finished yesterday’s session in Hong Kong very marginally down, by 0.08%. The index had started the session up but late selling in the final hour on the back of the U.S dollar hitting an 8-year high against the yuan and oil prices slipping back erased gains and took the Hang Seng to an overall loss for the day. The Hong Kong currency peg will mean a strong dollar will have a direct impact on the competitiveness of exporters and will be a drag on the domestic economy.
Macau resorts developer and resorts operator Sands China was the day’s biggest gainer, up over 5%. The share price is on the up as a result of Japan being expected to pass a bill to issue casino licenses, with Sands China well positioned as a major investor in the country should the bill pass. Galaxy Entertainment, another casino and hotels operator focused on Macau was the day’s second highest climber, finishing 4.33% up. The biggest loser was HSBC as banking stocks took a hit around Asia.
In Singapore the **STI** had a good session to finish 0.7% up. Golden Agri-Resources was almost 4% up on the day. The company reported Q3 profit of $310 million. The palm oil producer is benefitting from a rise in crude palm oil prices. Yangzijiang Shipbuilding was down 4.29% as gains from the previous day were largely pared back.

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