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Straits Times 3,309.20 -14.84 -0.45%
Hang Seng 29,465.37 -844.12 -2.79%
Dow Jones 24,987.47 -103.01 -0.41%
Shanghai Composite 2,907.82 -114.08 -3.78%
CMC Markets – Evening Update 21/09/12
Daily Bulletin | 21 September 2012

By David Fiander
Equities Risk Manager
CMC Markets Singapore

In what was an indecisive week of trading, Asian markets generally remained buoyant but certainly didn’t get carried away by the waves of stimulus pulling at investors.

The Bank of Japan was the next Central Bank to join the stimulus party as they eased monetary policy further and announced an additional 10 trillion Yen to their stimulus program, following action out of Europe and the United States in the proceeding weeks.

The other big story was the release of the HSBC Flash PMI reading which is a key indicator of China’s industrial activity.

A reading of 47.8 was recorded which is below 50 and indicates contraction but it is higher than the August reading of 47.6 which means it is stabilising and the need for further easing from China was not quite as pressing as some thought.

Asian equity markets have re-traced most of yesterday’s losses to finish the week mildly in positive territory.

The Shanghai Composite was the major outlier on the week losing around 4.5% in what was its biggest weekly loss of 2012. Growth prospects and a tight money market have meant that the optimism from the approval of a whole raft of new infrastructure projects a few weeks ago has faded into the background, and investors are eyeing potential open market operations from the People’s Bank of China to help bring down short term rates.

Despite the big shadow that is China, the Hang Seng market has still managed to eke out a weekly gain of just over 0.5% as rays of stimulatory sunshine still shine on the Pearl of the Orient.

On the local front the Straits Times Index will post a very modest gain of around 0.3% with the main story on the week being Thai Beverages agreeing to support the sale of Fraser and Neave’s stake in Asia Pacific Breweries to Heineken and take themselves out of the bidding war.

The Australian and Japanese markets managed gains of around 0.5% each also on the week as investors rotated their buying across the sectors with particular emphasis on commodities.

Crude oil was one of the biggest stories of the week as it lost over 6% on short term global growth prospects and the feeling that there enough supply currently and in the pipeline to supply a low growth world economy.

Gold had a bit of a bumpy ride over the week riding the waves of stimulus news flows before ending the week only slightly higher than we started, sitting now at around $1,773/oz.

Looking forward for next week, all eyes will be back on Europe with reports that EU authorities are working with the Spanish government in order to develop a rescue program, details of these talks are due to come out on Thursday.

First however on Monday we will see the minutes from the outcome of Japan’s Monetary meeting then on Wednesday we will switch over to the U.S for its New Home Sales. Finally on Friday we will see Japan’s Manufacturing PMI & Retail Sales figures.

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