ASIA MARKETS: Central Banks Hit Asian Stock Markets
September 14 2016 - 07:23AM
Dow Jones News
By Ese Erheriene
Traders brace for tightening from the U.S. Federal Reserve and
loosening from the Bank of Japan
Asian shares were largely off Wednesday, as traders braced for
an expected tightening from the U.S. Federal Reserve, and expected
loosening from the Bank of Japan.
Japan's Nikkei Stock Average sank 0.7%, taking its losses to
2.3% in the past five trading sessions. The Shanghai Composite
Index slipped 0.7% while the Hang Seng Index closed down 0.1%.
Overnight, the main U.S. indexes closed lower as investors
focused on possible action by the Fed at its meeting next week.
According to the Chicago Mercantile Exchange's FedWatch tool
(http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html),
the market believes there is a 15% chance of an interest-rate rise
in September, with a near 55% chance of a rate increase in
December.
"There's a lot of uncertainty as markets are unable to find a
clear explanation on what's going to happen with the upcoming Fed
meeting," said Alex Wijaya, a senior sales trader at CMC Markets.
"There's a lot of mixed messages."
However, the Bank of Japan, which also has a policy meeting next
week, seemed to be heading in the other direction. Japanese bank
stocks were hit Wednesday by a Nikkei report which said that the
BOJ was considering an interest-rate cut at next week's policy
meeting, taking rates deeper into the negative territory.
The yen weakened about 0.6% against the U.S. dollar after the
Nikkei newspaper said the BOJ intended to make its rate policy the
centerpiece of its monetary easing, as the effectiveness of
asset-buying has neared its limit.
The yen was also at a disadvantage against the dollar, which has
gained on expectations of hawkish comments coming from the U.S. Fed
next week, according to Roy Teo, a senior forex strategist at ABN
Amro.
While a cheaper yen is good for Japan's exporters, lower
interest rates hurt the net interest margin of Japanese banks.
Mitsubishi UFJ Financial Group Inc.(MTU) ended down 3.2% Wednesday,
Shinsei Bank Ltd. (8303.TO) closed 1.9% lower and Sumitomo Mitsui
Financial Group Inc. (8316.TO) was off 1%.
The BOJ is also widely thought to be trying to steepen Japan's
yield curve, by focusing its purchases of government bonds on
shorter dated maturities.
"[A steeper curve] would be negative for bank stocks, but good
for life insurance companies," said Tomoichiro Kubota, senior
market analyst at Matsui Securities.
A rebound in oil prices buoyed Australian stocks, with the
S&P/ASX 200 index closing up 0.4%. Malaysia's Bursa was off
0.9%. Brent, the global benchmark, was last up 0.6% at $47.39 a
barrel.
The market remains widely skeptical of oil price gains after an
announcement by the International Energy Agency on Tuesday that
global oil supply would outpace demand well into next year, a
reversal of its position a month ago, when it said that the market
would show no surplus this year.
Hong Kong's yuan overnight interbank-borrowing cost, jumped to
8.16%, its highest level since Feb. 19 and up from 2.84% on
Tuesday. It exceeded 5% both on Monday and last Thursday.
Market participants said yuan buying by branches of Chinese
state-owned banks in Hong Kong was likely behind the rise in
borrowing costs, and that the buying was likely directed by the
People's Bank of China.
The central bank's intervention in the so-called "offshore" yuan
market is likely aimed at curtailing bets that the yuan will
decline. The PBOC didn't immediately answer a request for
comment.
(END) Dow Jones Newswires
September 14, 2016 07:08 ET (11:08 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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