Asian Market Snapshot: Most Asian Markets Fall as Concern over U.S. Q2 Earnings Trump Chinese Stocks Rally and M&A News

A drop in U.S. consumer sentiment and downbeat banks earnings took a toll on Asian investor sentiment early in the trading hours. The Reuters/University of Michigan U.S consumer sentiment index, reported on Friday after Asian markets closed, dropped in early July to 66.5 lower than economists anticipated. The Median estimate by economists in the Bloomberg survey was 74. (See RGE CI:U.S. Consumers: Not Yet Showing Optimism).   U.S. Banks earnings also disappointed after Citibank reported Q2 profits of US$ 2.7 billion down from US$ 4.3 billion a year ago and Bank of America also reported a 3% drop in profit to US$ 3.1 billion. (See RGE CI: Q2 2010 Bank Earnings: Wall Street Experiences Slowdown). The declines, however, were partially limited by rebounds in Chinese shares and news of M&A activities in Australia. A consortium by TPG and Carlyle outbid KKR in a bidding war for Healthscope, Australia’s 2nd largest private hospital chain.

The MSCI Asia Pacific index fell 0.6% to 116 while the MSCI Asia Pac ex Japan slumped 1% to 390.89. The MSCI Asia Apex 50 declined 0.8% to 722.

In Japan, markets were closed in observance of Marine day.

In Hong Kong, stocks fell on disappointing U.S. banks earnings. The Hang Seng fell 0.8%. A report by the State Information Center showed the agency is expecting China’s export growth to slow to less than half the pace of H2.

In mainland China, stocks rose led by property developers on reports that local governments will build more low-income housing. The Shanghai Composite surged 2.1% with A shares up 2.11% while B shares gained 1.73%. Poly Real Estate advanced 2.9% while China Merchant Property Development surged 3.6%.

In India, stocks fell on concerns over accelerating inflation. The BSE Sensex 30 fell 0.2%. DLF Ltd, India’s biggest real estate developer, declined 1.3%. Reliance rose 2.1% after reports that the company is nearing an accord to buy 26% of India’s 2nd largest wireless company.

In Australia, stocks fell after PM Gillard called for a general election on August 21st.  The result of the election is likely to determine whether resources companies pay higher taxes or not. The S&P/ASX 200 down 1.5%. BHP and Rio Tinto declined 1.1% while Newcrest, a higher beta stock, lost 1.8%.  Healthscope however jumped 10% after Carlyle and TPG agreed to buy the company for US$1.7 billion.

In Seoul, the KRX 100 declined 0.5% to 3,624.     

On currencies, the yen advanced 0.13% against the dollar to 86.93 on investors’ flight to safe-haven. All other major Asian currencies were flat or declined against the dollar. The Aussie dollar fell 0.03% while the Korean won fell 1%.

Sovereign yield declines as investors sought relative safety. The 10-year Australian yield declined 0.1 bps to 5.115%. The Markit iTraxx Asiaex Japan 50 IG CDS spread widened 9 bps to 137 bps.

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