 Asian Shares Weaker; Yen Strength Hurts Japanese Exporters
Marketwatch - 9/8/2010 8:10:00 AM
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Asian stock markets were weaker Wednesday after Wall Street declined amid concerns over the health of European banks, with exporter shares dragging the Tokyo market lower amid ongoing strength in the yen.
Japan's Nikkei Share Average was down 1.7% while Australia's S&P/ASX 200 slipped a more-modest 0.2%, South Korea's Kospi Composite was down 0.2% and New Zealand's NZX-50 was off 0.4%.
Dow Jones Industrial Average futures were up five points in screen trade.
"Japan's situation is particularly grim amid the possibility the yen may strengthen further," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.
"Expectations are slim that the government will intervene in currency markets" unless the U.S. Dollar falls below Y83, he added, with Prime Minister Naoto Kan unlikely to take action on the foreign exchange front before the ruling Democratic Party of Japan's presidential election next week.
Losses were broad-based with 32 of the Topix's 33 subindexes weakening. Among exporters, Advantest dropped 4.0% and Honda Motor shed 2.2%. Banks were also lower, tracking losses in their U.S. and European peers on concerns about Europe's banking sector, with Sumitomo Mitsui Financial Group down 2.1%.
Uni-Charm, a maker of sanitary napkins and paper diapers, dropped 3.5% after announcing plans to offer up to Y80.5 billion of euroyen convertible bonds.
In Sydney, some strength in defensive stocks supported the market, with traders reluctant to preempt further declines ahead of the Federal Reserve's Beige Book commentary on the economy later Wednesday.
Major bank stocks were down 0.7% to 0.9% on weakness in their offshore peers while in the resources sector, BHP was down 1.3% and Rio Tinto lost 1.4%.
Foster's Group rose 5.4% after rejecting an unsolicited bid for its wine assets from a private equity firm, which valued the unit at A$2.3 billion-A$2.7 billion; it is pushing ahead with a demerger of its beer and wine divisions.
Telstra was up 1.1% in anticipation of National Broadband Network-related payments after the Labor government retained power Tuesday.
Foreign investors were selling technology stocks in Seoul, said MiraeAsset Securities analyst Lee Jin-woo. "But since they had been snatching up tech issues for the past three days, I don't see (the selling) as a negative sign" for the overall market, he added.
Investors were watching for the Korean central bank's rate decision Thursday. But "even if the Bank of Korea hikes rates, it won't hurt the stock market as investors might think it means the Korean economy is in good shape," said SK Securities' Choi Seong-lak.
Samsung Electronics dropped 1.3% after its chip division chief said Tuesday an oversupply in DRAM chips may occur early next year if global demand for personal computers slows further. Chip maker Hynix Semiconductor was down 2.6%.
New Zealand share trade was muted as the impact of the weekend earthquake that hit the city of Christchurch faded, said Hamilton Hindin Greene broker Adrian Vance. "We did see those trades come through on Steel & Tube, Fletcher Building, Opus International and anyone who is going to get financial benefits out of the rebuilding of Christchurch (earlier in the week but) that hasn't followed through today." Steel & Tube and Opus were flat while Fletcher Building was down 0.6%.
In foreign exchange markets, the yen traded in tight ranges against the dollar and the euro, taking a breather after sharp losses on Tuesday. The dollar hit a fresh 15-year low of Y83.51 Tuesday and was last at Y83.73, from Y83.80 late in New York trade.
The euro was at Y106.40, from Y106.33 in New York and at $1.2697, from $1.2687.
"This is just the beginning" of another leg down for the euro, said Toshihiko Sakai, senior dealer at Mitsubishi UFJ Trust and Banking, adding the single currency could fall to $1.2570 before long, given continued worries about European economic and banking sector health.
Lead September Japanese government bond futures were up 0.20 to 141.75 points, with the yield on the 10-year cash JGB down two basis points at 1.120%.
Spot gold was at $1,256.20 per troy ounce, up $1.00 from New York, with October Nymex crude oil futures down 29 cents at $73.80 per barrel on Globex.
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