Asian stocks drop as China data sow deflation fears, but STI up 0.55% with Singdollar

Pedestrians walking past a share price display in Tokyo on Sept 29.
Pedestrians walking past a share price display in Tokyo on Sept 29. PHOTO: AFP

WELLINGTON (BLOOMBERG) - Asian stocks retreated with industrial metals and the Australian dollar as Chinese factory-gate prices equaled their biggest slump since the global financial crisis, underscoring the threat that weakness in the world's second-largest economy poses to efforts to fight deflation. Singapore's dollar climbed as regulators eased their currency policy.

The MSCI Asia Pacific Index slid as materials and energy shares led losses for a second day. Chinese shares in Hong Kong retreated, while Japanese equities fell as the yen rallied amid haven demand. The Aussie, a China bellwether given the two countries' trading links, weakened 0.3 per cent. Copper dropped with nickel and zinc as US crude oil held below US$47 a barrel, close to a one-week low.

The MSCI Asia Pacific Index lost 1.2 per cent by 10:47 am in Tokyo, bringing it back to levels last seen at the start of October. Japan's Topix index was also down a second day, retreating 1.9 per cent to put it on track for its biggest one- day drop this month.

On the back of better-than expected flash GDP figures that saw the Singapore economy narrowly escape a tecnical recession, the Straits Times Index rose 0.55 per cent to 3,001.22 as of 11:01 am.

The Singapore dollar snapped a two-day drop, rising 0.3 per cent after the monetary authority, the only advanced economy regulator to use the exchange rate as a key policy tool, said it would "slightly" reduce the pace of the currency's appreciation versus those of its trading partners.

The Hang Seng China Enterprises Index fell 0.8 per cent in Hong Kong, while the Hang Seng Index retreated 0.7 per cent. The Shanghai Composite Index edged higher.

Australia's S&P/ASX 200 Index slipped 0.4 per cent, falling a third day, as the Kospi index in Seoul dropped 0.5 per cent. New Zealand bucked the trend, with its S&P/NZX 50 Index up 0.3 per cent in a fourth straight day of gains. Markets in Indonesia and Malaysia are closed for holidays Wednesday.

"In terms of global growth, the risk is skewed towards the downside," said Chris Green, an Auckland-based strategist at First NZ Capital Ltd., said by phone. A softer read on the Chinese inflation data reinforces the backdrop of deflationary pressures and softer growth profile globally. The Chinese economy is probably the largest risk that the global economy faces at this point."

China's consumer inflation came in below estimates and factory gate deflation extended a record stretch of declines, signaling the People's Bank of China still has room to ease monetary policy further to support a slowing economy. The data follows a report on Tuesday that showed a collapse in imports to the world's No 2 economy that's transmitting the slowdown to other economies.

JPMorgan Chase & Co., the first of the big US banks to report earnings, posted below-estimate profit and a drop in revenue late on Tuesday.

S&P 500 Index futures were little changed following a 0.7 percent drop in the U.S. benchmark, its second retreat in 11 days. Futures on the Dow Jones Industrial Average were also down 0.2 percent after the index halted its longest run of gains this year. FTSE 100 Index contracts slid 0.9 percent.

The Aussie weakened to 72.23 US cents after sinking 1.6 per cent on Tuesday, its steepest one-day drop since Aug. 24. Westpac Banking Corp., the nation's second-biggest lender, announced an increase in home loans, a move that could drag on the economy and prompt the central bank to continue easing monetary policy, according to Shane Oliver, global strategist at AMP Capital Investors Ltd.

The yen, which typically strengthens during bouts of risk aversion, climbed to 119.62 per US dollar after gaining 0.4 per cent the past two days.