• News
  • Columns
  • Interviews
  • BW Communities
  • BW TV
  • Subscribe to Print
BW Businessworld

Weak China Shares Depress Asia, Ukraine Also A Risk

Photo Credit :

Extended weakness in Chinese shares, driven by worries over liquidity and earnings, put a brake on other Asian stock markets on Tuesday (22 April) despite Wall Street stocks rallying into a fifth session.

Financial spreadbetters expected European shares will benefit from the Wall Street rally, and forecast Britain's FTSE 100 to open around 29 points higher, or up 0.4 per cent; Germany's DAX to open 60 points higher, or up 0.6 per cent; and France's CAC 40 to open up 0.6 per cent.

Japan's Nikkei share average began the day with a small gain and eventually fell 0.4 percent. MSCI's broadest index of Asia-Pacific shares outside Japan was almost flat, while trading not far from a six-month high hit earlier this month.

The China Enterprises Index of the leading offshore Chinese listings in Hong Kong fell 1 per cent to its lowest in nearly four weeks. That subdued other Asian markets, forcing investors to look past the longest winning streak since October in the S&P 500 index.

"Today is going to be a bit weak," said Du Changchun, an analyst at Northeast Securities in Shanghai. "I'm not so optimistic, I don't think there's much space for any increases as we're still in a period of adjustment."

The Shanghai Composite Index fell 0.8 per cent to around 2,048 points on Tuesday, following a loss of 1.5 per cent the previous day.

Chinese stocks have been hit by concerns about a potential share oversupply after the securities regulator released draft prospectuses for 28 new firms planning to list, marking the resumption of initial public offerings after a two-month hiatus.

Chinese companies such as Great Wall Motor Co Ltd, carmaker BYD and Air China have all posted weak earnings numbers or expected earnings numbers over the past week, leading to further concerns over the slowing economy.

Meanwhile, investors continued to see tensions in Ukraine as a threat to risk appetite, even though those seemed to be having less of an impact on safe-haven currencies such as the Japanese yen and other markets this week.

"I don't think this will lead to a military conflict. Nonetheless, towards the presidential election in Ukraine (planned for May 25), more tensions are likely and there will be phases where share prices will be hit," said Soichiro Monji, chief strategist at Daiwa SB Investments in Tokyo.

Following a gunfight that killed at least three on Sunday, Washington and Moscow each continued to put the onus on the other to ensure tensions are eased.

Washington threatened to impose additional sanctions against Russia "in days" if Russia does not implement an agreement struck last week.

Oil prices, in fact, were supported by worries over Ukraine. U.S. crude futures stood at $104.19 per barrel, near a six-week high of $104.99 hit on Thursday.

Japan Trade Data
In the currency market, the yen stayed near a two-week low against the dollar, smarting from Japanese trade data on Monday showing soft exports in March and a record trade deficit in the fiscal year that ended in that month.

The dollar fetched 102.5 yen, just off Monday's peak of 102.71 yen, which was its highest level since April 8.

The euro traded at $1.3793, also near its lowest level in almost two weeks, after European Central Bank officials expressed concern that a strengthening currency could damage the euro zone's nascent recovery.

The offshore yuan hit a fresh 14-month low of 6.2345 to the dollar on worries over a slowing Chinese economy and following Beijing's clamp-down on one-direction bets on the yuan's gains since February.

Elsewhere, gold prices fell to a nearly three-week low on sharp outflows from SPDR Gold Trust, the world's biggest bullion-backed exchange-traded fund.