Asia Market Snapshot: Most Asian Stocks Fall on Concerns over Japanese Debt Despite Gains in Mining and Developers

Most Asian stocks fell as concerns over Japan’s ability to cut its debt overshadowed gains in mining and developers.

The Japanese ruling party lost control of the upper house of parliament in yesterday’s election, undermining its efforts to cut public debt as well as Japanese political stability. The Liberal Democrats won 51 seats beating the Democratic Party by 7 seats. (See RGE Critical Issue: DPJ Loses Outright Majority in Japan’s Upper House: What Happens Next?). PM Naoto Kan, the fifth PM in four years, has been losing approval since he took office in June with unpopular suggestions like an increase of the consumption tax. The results of the election helped send Japanese stocks and the MSCI Asia Pac index lower despite the rally in Australian miners and Chinese developers. 

The MSCI Asia Pacific index lost 0.1% to 116.02. The MSCI Asia Apex 50 advanced 0.23% to 734.94.

In Japan, stocks fell led by domestic names as investors shift their holdings toward exporters amid political uncertainty and a weak yen.The NIKKEI 225 declined 0.4% to 9,548.Mitsubishi Financial dropped 2.1% while Shinsei Bank dropped 2.8%. Honda with a 40% exposure to North America surged 3.1% while Sony jumped 3.6%.

In Hong Kong, stocks and developers rallied on speculation that China will relax its tightening measures on the property market. The Hang Seng index gained 0.44%.China Overseas Land gained 4.4%.

In mainland China, stocks also rose led by banks and developers on speculation that the government will ease its tightening stance on mortgage lending.The Shanghai Composite advanced 0.8%with A and B shares all up more than 0.85%. ICBC gained 2.6% while Poly Real Estate climbed 3.7%. On the economic front, China’s exports rose, more than expected, 44% to US$ 137 billion.New lending slowed in June to US$ 89 billion and real-estate prices in 670 cities fell 0.1%m/m. (See RGE Critical Issue: Chinese Exports Surge: How Sustainable?)

In India, stocks rose on upbeat earnings growth expectations as the economic expansion quickens. The BSE Sensex 30 rose 0.58%.Tata Motors rose 2.5%. Industrial production rose 11.5% in May, less than economists’ expectation of 16.2%.

In Australia, stocks rose as miners advanced on higher metal prices. The S&P/ASX 200 rose 0.31%led by basic materials (up 1.15%).Rio Tinto rose 1% while Newcrest gained 2%. Home-loan approvals rose 1.9% in May, beating economists’ expectation of no change. In New Zealand, the NX 50 advanced 0.23% to 3,012.

In Seoul, stocks advanced with the KRX 100 up 0.59% to 3,630. The Bank of Korea raised its growth and inflation forecasts for the year with an expected GDP growth of 5.9%. Last week the IMF raised its forecast for the country to 5.75% from 4.5%.

The yen fell 0.08% as investors grew concernedto 88.67 against the US dollar.The Aussie, dollar gained 0.22% against the US dollar while the Hong Kong dollar gained 0.03%.The rupee fell 0.2% to 46.77 as the weak IP numbers lowered expectations of another rate hike.

Japanese Government Bonds (JGBs) rose on speculation that the government will increase pressure on the central bank to combat deflation after yesterday’s election.  The yield on the 10-year JGB fell 3 bps to 1.12%.The Indian 10-year bond rose with the yield dropping 4 bps to 7.61%.

All rights reserved, Roubini Global Economics, LLC