Asia Stocks Mixed As Indonesia Rebounds

A selloff across Asia in August has taken its heaviest toll on stocks in Indonesia and the Philippines, leaving them heading for their worst monthly slump since the height of the 2008 global financial crisis.

While sentiment across the region stabilized Thursday on signs that a U.S.-led military strike on Syria may be delayed, most equity markets are still left nursing heavy bruises inflicted by worries that the U.S. is close to pulling back from aggressive monetary stimulus.

The benchmark indexes in Indonesia and the Philippines — down 12.3% and 11.1%, respectively, in August, with just one more trading day left — are set for the biggest drop since October 2008, when the world was roiled by the collapse of Lehman Brothers Holdings Inc. Thailand has also been battered, down 9.9% this month, though it suffered more during September 2011, when the country was ravished by heavy flooding.

The three fast-growing countries, known as the “TIP” economies, had seen a surge of buying over the past couple of years that’s sent valuations skywards and ranked them among Asia’s top performers earlier this year. Many investors still remain optimistic, saying the gains had been too far and fast and a pullback is natural.

The Philippines staged a rebound Thursday, rising 2.9% after the country reported economic growth in the second quarter of 7.5%, matching expectations and easing fears that the country is slowing down.

While India has been at the heart of the storm too on worries about its widening current-account deficit, most of the action has been on the rupee, down almost 12% this year to a record low but leaving stocks relatively unscathed and down just 6% in 2013. Indonesia’s rupiah has fallen almost 6% this year and the Philippine peso down 2.8%.

The trigger for the selloff has been rising yields on dollar-denominated assets and uncertainty over the future policy of the U.S. Federal Reserve that’s spooked global investors. That’s left risky markets less appealing and prompted cash to be yanked out, creating havoc for small emerging markets.

Bonds have also taken a beating. Indonesia’s dollar bonds that are widely held by foreign fund managers have plummeted, falling 9.2% this month and taking losses to 18.8% so far this year, which ranks them the region’s worst. Local currency bonds have also fallen, down 4.2% this month and 16.4% in 2013.

In the Philippines, dollar bonds are down almost 3% in August and taking losses to 9.3% this year. For the debt markets though, moves were also big in June, as a slide in Treasurys spilled over into heavy losses for bond markets across the globe.

This week, the region also took a fresh hit as nerves were ratcheted up and oil jumped on signs that the U.S. may launch an attack on Syria after the Middle East nation used chemical weapons against civilians last week. Analysts worry that any military action could also ensnare other oil-producing nations in the region and enter the U.S. into another costly war. U.S. President Barack Obama though cautioned overnight that he hasn’t yet decided whether to launch an attack, allowing markets to take a breather.

The price of oil, which rose on the Middle East concerns, eased slightly Thursday in Asia and was last down 0.8% at $109.27 a barrel. The yen, traditionally viewed as a safe-haven asset in times of stress, also softened against the dollar overnight and was steady at ¥97.64.

The weaker currency gave Japan a helping hand, with the Nikkei up 0.4%, while South Korea’s Kospi rose 1.2%. Australia’s S&P/ASX 200 however fell 0.3%.

In China, Hong Kong’s Hang Seng Index rose 0.4%, and the Shanghai Composite was down 0.3%.

The easing concerns over Syria allowed markets to look at economic data, with the U.S. pending home sales index down for the second straight month. In recent months, U.S. economic indicators have been scrutinized over whether the Federal Reserve will withdraw its bond-buying program. Later in the global day, the U.S. will release second-quarter gross domestic product data.

The earnings season in China and Australia was wrapping up with local markets digesting reports of large companies. Shares in China’s third-largest bank by assets, Agricultural Bank of China, rose 1.8% after it reported a 15% increase in its first-half profit, though executives warned of slower profit growth and narrower interest-rate margins over the rest of the year.

Shares in Qantas   jumped 11% in Sydney after the company reported that its underlying pretax profit for the fiscal year doubled to 192 million Australian dollars.

Source : Marketwatch