High Flying Emerging Markets Pause

123jump.com Staff
27 Jul, 2007
New York City

Asian markets fell in sympathy with a decline in Europe and New York. Several market analysts encouraged investors in India, Brazil, and Turkey to take advantage of this sell-off on promising outlook on earnings. Domestic economy remains healthly in most emerging markets on low cost of borrowing, rising exports, and increasing domestic wages. Turkey fell 1.35% at the end of mid-day session after falling 4.2%,leading the global decline on Thursday. Taiwan, Korea suffered similar declines.

[R]8:30AM New York – Asia and emerging markets suffer the heaviest loss since late February.[/R]

Asian markets declined following decline of 2.3% in the U.S. and 3% decline in the European markets. Japan, the largest market in the region, fell 2.3% mirroring losses on Wall Street.

Taiwan led the region with a loss of 4.22% followed by 4.09% decline in Korea. Philippines dropped 3.9%, India declined 3.4%. Hong Kong, Australia, and Indonesia fell 2.8%. Singapore and Thailand dropped 2.4%.

Asian markets have been in the upswing the last five weeks with several markets trading at record levels. India and Philippines have traded at elevated levels on domestic economic strength; South Korea on rising exports and strong commodities prices have lifted Indonesia to a new highs.

Markets in Shanghai had run up 11% in the last five trading sessions and failed to participate in the current sell-off. Chinese government has raised interest rates on bank deposits, tightened the lending rules for real estate but investors continue to pour money into local stocks markets. In the month June, China reported daily new stock trading accounts opening near record level.

Australia fell 2.76% on weak metal prices and worries that strength is currency may affect commodity exports. New Zealand lost 1.8% after its strong currency came under heavy pressure faced by unwinding of yen carry trades.

Emerging markets in Asian reflected similar losses in South America and Europe. Brazil lost nearly 4% and Mexico dropped 3.6% on a day when stock markets around the world got clobbered. Turkey dropped 4.2% leading the global markets rout on Thursday and dropped another 1.35% at the end of the mid-day session today.

[R]7:00AM New York, 8:00PM Tokyo – Tokyo declines mirroring losses in Europe and the U.S.[/R]

Nikkei 225 Index in Tokyo dropped 2.36% or 418.28 to 17,283.81 and Topix fell 37.47 or 2.33% to close at 1,699.71. For the week Nikkei lost 4.8% and curtailed its gain for the year to 0.3% and Topix dropped 4.3% and limiting its rise for the year to 1.1%.

The unwinding of carry trade in the region and a decline in the U.S. and European markets dominated the trading sentiment in Tokyo. The stocks fell at the opening and continued to trade lower in the session.

Decliners

Fujitsu plunged 6% to 789 yen after reporting a net loss of 14.8 billion yen. The company reported its first loss after nine quarterly profits in a row.

Canon plunged 5.5% to 6,510 yen, Nintendo lost 6.2% to 58,000 yen, and automakers fell as well in the sell-off. Toyota Motor dropped 1.8% and Honda Motor lost 2.5%. Daihatsu, Nissan and other makers fell as well.

Trading companies, oil refiners, and mining companies fell for the second day in a row after surging year to date. The largest oil refiner Nippon Oil lost 6.4% to 1,047 yen and largest oil explorer Inpex declined 3.2% to 1.2 million yen.

Retailers fell after reporting a surprise sales decline in June. Seven & I Holdings dropped 1.2% to 3,390 yen, supermarket operator Aeon Co. lost 4.6% to 1,917 yen, and Seiyu Limited declined 1.5% to 129 yen.

Ministry of Economy Trade and Industry reported that retail sales in June fell 0.4% from a year ago. Sales at large retailers were up 0.9% and wholesales sales were up 5.3%

Metals and oil trading companies dropped for the second day in a row. Sumitomo Mining, Marubeni, Mitsui Mining declined more than 2%. Nippon Steel was dragged in the sell off as well. Shipping companies repeated the losses of more than 2.2% for the second day in a row.

Gainers

Toyota group of companies saw their stocks rise on a day of sell-off. Hino Motors gained 1.3% to 791 yen after reporting a sharp rise in earnings on overseas sales. Toyota Tsusho, trading company in the group rose 4% to 3,130 yen after reporting earnings gain.