Banks declined in China after Moody’s Investors Service said the potential scale of problem loans at lenders is greater than had been anticipated, offsetting gains […]
Banks declined in China after Moody’s Investors Service said the potential scale of problem loans at lenders is greater than had been anticipated, offsetting gains elsewhere. The MSCI Asia Pacific Index fell 0.2% to 137 at noon in Tokyo, reversing earlier gains by as much as 0.2%. A similar number of shares rose and fell on the 1,018- member gauge. Exchanges in the US were closed for the Independence Day holiday yesterday.
Through yesterday, the gauge fell 2.6% from this year’s high on May 2 amid concerns that a slowing US economy, Europe’s sovereign-debt crisis and China’s steps to curb inflation will crimp earnings. Japan’s Nikkei 225 Stock Average fell 0.2% after earlier rising as much as 0.2%. South Korea’s Kospi Index climbed 0.5% and Australia’s S&P/ASX 200 Index slipped 0.1%. Hong Kong’s Hang Seng index (HSI) was little changed, while China’s Shanghai Composite Index fell 0.2%. Futures on the Standard & Poor’s 500 Index retreated 0.1% today.
The Reserve Bank of Australia maintained its benchmark cash rate at 4.75%, unchanged as expected. The Australian economy is reporting mixed signs – weakness in the consumer and services sectors while mining and energy continue to reap benefits from strong pricing and record investment. While the balancing act is difficult, we think the RBA is achieving its inflation targeting goal. RBA’s view of GDP moderating from prior estimates, inflation remaining at the bottom half of the target range and not expected to exceed this over the next twelve months surprised some observers.
In corporate news, Chinese banks fell after Moody’s said in a report today that the potential scale of problem loans at the lenders may be closer to its stress case than its base case. The ratings agency said it views the credit outlook for the Chinese banking system as potentially turning to negative. Electronic shares in Taipei and Seoul slid following a Digitimes report yesterday that Taiwanese and South Korean-based LCD panel makes have lowered output since the start of June as global demand for televisions remains weak. Tokyo Electric – the utility at the center of the worst nuclear crisis in 25 years – jumped 7.1% to 421 yen today, its highest level since May 13.
Also in Japan, regional banks rose after a report by Nomura said the brokerage is bullish on the local lenders. 77 Bank advanced 1.6% to 371 yen. Nomura said the bank was its ‘top pick’ on improved earnings prospects. Bank of Yokohama rose 2% to 418 yen and Fukuoka Financial Group increased 1.5% to 348 yen. In commodities, oil traded near $95 a barrel for a second day in New York, failing to extend last week’s 4.2% gain as investors bet China will step up efforts to cool its economy, tempering fuel demand.
