Stocks in Asia decline after fall in oil prices
Asian bourses traded mostly lower on Wednesday following MSCI’s decision to add mainland Chinese stocks to its emerging markets index gradually and as oil prices slipped around two percent overnight.
The Nikkei 225 declined 0.45 percent and the Kospi fell 0.61 percent.
Australia’s benchmark S&P/ASX 200 index tumbled 1.36 percent, dragged lower by its energy and materials sub-indexes which were down 2.11 percent and 2.34 percent respectively.
Markets in greater China were mixed following MSCI’s decision to include A-shares.
The Hang Seng Index fell 0.55 percent, but mainland markets made modest gains. The Shanghai Composite rose 0.15 percent and the Shenzhen Composite edged higher by 0.05 percent.
MSCI announced it would add China A-shares to its MSCI Emerging Markets Index after rejecting China’s previous three attempts. The index giant said it will add 222 China A Large Cap stocks from next year.
Inclusion in the MSCI will provide “only a modest boost” to capital market reforms in China, especially in the areas of shareholder rights and debt market reform, but is unlikely to be a breakthrough, the Eurasia Group said in a statement.
“Regardless of the MSCI decision, Chinese equity markets still suffer from serious institutional shortcomings as well as heavy political influence,” said Michael Hirson and Christopher Beddor from Eurasia Group.
The MSCI decision was overshadowed by the fall in oil prices to seven-month lows following news of an increase in production from Libya and Nigeria. Prices of U.S. West Texas Intermediate were in bear territory after falling more than 20 percent from recent peaks overnight.
Brent crude was off by 0.24 percent at $45.91 a barrel and U.S. WTI crude edged lower by 0.16 percent to trade at $43.44. News that Saudi Arabia has relieved Muhammad bin Nayef as crown prince, replacing him with Mohammad bin Salman, according to a royal decree published by state news agency SPA, has not riled prices. But a shakeup in the royal family will be a closely-watched event for changes in economic, political and foreign policies.
In Australia, energy stocks traded in the red given the fall in oil prices, with oil and gas producer Santos declining 2.01 percent. Major banking stocks were also under pressure, with National Australia Bank declining 2.64 percent and ANZ down by 1.82 percent.
In Japan, Toshiba announced it would be selecting a consortium led by the Innovation Network Corporation of Japan as a preferred bidder for its flash memory unit. The consortium consists of the INCJ, Bain Capital Private Equity and the Development Bank of Japan. Toshiba shares traded 1.12 percent lower.
The dollar traded at 97.703 against a basket of rival currencies, after trading as high as 97.871 in the previous session. Against the yen, the dollar traded at 111.21, off a high of 111.50 seen earlier.
The British pound, which traded as low as $1.2617 overnight, last traded at $1.2632. Pound sterling fell to a two-month low after Bank of England Governor Mark Carney said the central bank would not be raising interest rates anytime soon due to uncertainty surrounding Brexit.
Markets are also parsing through mixed signals from Fed speak overnight. Chicago Fed President Charles Evans told CNBC the central bank could wait until year-end before making a decision on increasing interest rates. Boston Fed President Eric Rosengren sounded more hawkish, saying that low interest rates meant policy would be “less capable of offsetting negative shocks.” Rosengren is not a voting member of the FOMC.
The Bank of Japan’s minutes for its June meeting reflected that the central bank said the level of government bonds it purchases could fluctuate but this was unlikely to affect guidance, Reuters said. The minutes also showed the BOJ remained cautious on the 2 percent inflation target.
Major indexes on Wall Street closed lower as energy stocks were pressured by the fall in oil.
Source: CNBC
