Asian Stocks Tumble After Fed Decision

Tomahawk, WI 9/22/2011 (PennyPayDay) – Asian stock markets tumbled on Thursday after the U.S. Federal Reserve warned of major risks to economic growth and HSBC's China Flash PMI survey showed factory sector contracted for a third consecutive month in September.

U.S. stocks suffered their worst drop in a month overnight after the Fed's cautious comments, driving investors to buy the U.S. dollar as a safe haven. Several Asian currencies slumped to multi-month lows against the dollar and commodities extended losses as investors fretted about deteriorating global growth outlook. The Fed's announcement of a $400 billion long-term debt purchase plan failed to impress investors, as it had already been priced in by markets.

Tokyo stocks fell sharply, with the Nikkei average shedding 2.1 percent, as traders were skeptical about the effectiveness of Operation Twist that the Fed announced to support a stronger economic recovery. The broader Topix index fell 1.7 percent. China-sensitive shares like Komatsu and Hitachi Construction Machinery fell around 4 percent each, spurred by data showing a further slowdown in China's manufacturing sector. Softbank, the sole seller of Apple Inc.'s iPhones in Japan, plunged 12.3 percent on reports that mobile phone carrier KDDI Corp. is in talks with Apple to sell the next-generation iPhone 5 in Japan.

Financials such as Sumitomo Mitsui Financial Group and Mizuho Financial Group ended down about 1.8 percent each, Mitsubishi UFJ Financial Group fell 1.5 percent, brokerage Nomura Holdings plummeted 4.7 percent and Daiwa Securities Group tumbled 4.4 percent, mirroring falls in their U.S. counterparts overnight following a credit rating downgrade of three top U.S. banks by Moody's. A weaker euro dragged down export-related shares, with Honda Motor leading the losses, falling 3.9 percent. Nippon Steel fell 3.8 percent and Sumitomo Metal Industries shed 2.4 percent after the companies announced the exchange ratio for their merger.

China's Shanghai Composite index fell 2.8 percent on concerns over a slowing domestic economy after the survey by Markit Economics showed that China's manufacturing sector contracted for a third month running in September, with both production and new orders declining during the month.

The flash HSBC manufacturing purchasing managers' index, or PMI, fell slightly to 49.4 in September from 49.9 in August, with a PMI reading below 50 indicating contraction of the sector. Hong Kong's Hang Seng index plunged a whopping 4.9 percent to its lowest level since July 2009, dragged down by energy shares and property developers on heightened fears over the global economy.

The Australian market fell to its lowest level in more than two years after the Fed painted a grim picture of the struggling American economy. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index lost about 2.6 percent each to end at their lowest levels since July 2009. Banks bore the brunt of the selling with Westpac, ANZ, Commonwealth and NAB losing 2-3 percent. Investment bank Macquarie fared worse, ending down 3.8 percent.

Big miner BHP Billiton tumbled 4 percent, while rival Rio Tinto and Fortescue plummeted over 6 percent each. Oil & gas giant Woodside lost 3.4 percent, Santos fell 3.2 percent and Oil Search slumped 4 percent. Shares of Fosters climbed 7.6 percent after SABMiller said it would complete the takeover of Australian beer giant before the end of 2011. Likewise, Oroton soared 7 percent after the luxury accessories retailer reported a better-than-expected 8 percent rise in annual profit.

South Korea's Kospi average slumped 2.9 percent as the Federal Reserve's assessment that there are significant downside risks to the economic outlook and Moody's downgrading of the debts of U.S. banks spooked investors. The downbeat manufacturing data from China, the engine room of global growth in recent years, also deepened concerns about the world's economic growth outlook.

The local currency skidded to multi-month lows to close at 1179.8 won per dollar, down nearly 2.6 percent from Wednesday's close. The South Korean economy could grow 3.6 percent in 2012, down from 3.8 percent growth estimated for this year, as global economic uncertainties affect exports, the Yonhap News said, citing a report published by a private think tank, the LG Economic Research Institute.

Major banks such as KB Financial Group and Hana Financial Group lost over 5 percent each, steelmaker POSCO tumbled 4.3 percent, heavyweight Samsung Electronics fell 2.8 percent and automaker Hyundai Motor shed 1.9 percent. STX Engine bucked the declining trend to close 2.8 percent higher on a report of an impending order worth 800 billion won from Iraq.

The New Zealand market bucked the downward trend in the region to end marginally higher, as a weaker kiwi dollar and Fonterra Cooperative Group's record sales, profit and and payout to farmers offset negative reaction to Fed statement indicating "significant downside risks" to the world's largest economy.

Meanwhile, the nation's gross domestic product increased just 0.1 percent in the June 2011 quarter compared to an upwardly revised 0.9 percent growth in the preceding quarter, Statistics NZ said today, sending the local currency to a four-month low against its U.S. counterpart and reinforcing the case for central bank governor Alan Bollard to keep interest rates low until 2012.

The benchmark NZX-50 closed 0.1 percent higher, reversing early losses, with exporter Fisher & Paykel Healthcare leading the gainers. Shares of the breathing mask and respirator manufacturer climbed 3.5 percent, while Vital Healthcare Property Trust, specialist investor in medical properties, rose 2.7 percent and Telecom, the nation's biggest telephone company, gained 1.5 percent. Restaurant Brands led the decliners on the exchange, falling 4.6 percent after the fast-food franchise operator earlier this week reported a 6.5 percent decline in second-quarter sales.

Elsewhere, India's Sensex was last trading down 3.4 percent, Indonesia's Jakarta Composite index was down nearly 9 percent, Malaysia's KLSE fell 2.2 percent, Singapore's Straits Times was losing 2.7 percent and the Taiwan Weighted ended down 3.1 percent.

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