Back-to-back annual declines for Asian stocks

Slowing Chinese growth, commodities rout lead to first consecutive drop since 2002

HONG KONG • Asian stocks were poised for the first back- to-back annual declines since 2002 as decelerating Chinese growth and the rout in commodities sent equities tumbling during the year to underperform benchmark gauges in Europe and the United States.

The MSCI Asia Pacific Index headed for a 4.3 per cent drop last year, compared with a 0.2 per cent advance for the Standard & Poor's 500 Index and a 7.4 per cent increase for the Stoxx Europe 600 Index.

"2015 has been a very volatile and difficult year as the markets were assaulted by volatility from different asset classes," said Mr Kelvin Tay, regional chief investment officer at UBS' wealth management business in Singapore.

"The sharp sell-off in the commodities market badly affected the Asian currency markets, especially South-east Asian currencies and equities. China's economy will have a soft landing in 2016."

After outperforming global shares in the first six months of the year, with the benchmark regional index touching the highest level since 2008, Asian equities slid in the second half on China's surprise yuan devaluation and investor concern about the Federal Reserve's interest-rate outlook.

Policymakers raised US rates last month for the first time in almost a decade and signalled gradual tightening this year.

Energy and raw-material producers led declines on the MSCI Asia Pacific Index in 2015, dropping at least 15 per cent, as sentiment has turned negative after a decade-long bull market that was driven by China's hunger for crops, metals and fuel. Producers rushed to meet that demand, resulting in expanded supplies that are now causing gluts as the world's second-largest economy grapples with the weakest growth in a generation.

China's gross domestic product will slow from an estimated 6.9 per cent growth rate last year to 6.5 per cent this year, according to a Bloomberg survey. The nation's manufacturing sector probably contracted for a fifth straight month in December, according to the median forecast of analysts in a separate Bloomberg survey.

The Shanghai Composite Index slipped 0.9 per cent yesterday, finishing with an advance of 9.4 per cent for the year. That contrasts with a 19 per cent slump for the Hang Seng China Enterprises in Hong Kong. The gauges diverged last year for the first time in a decade after the government intervened to support shares in Shanghai and Shenzhen and foreign investors turned bearish on the nation's earnings prospects.

Australia's S&P/ASX 200 Index fell 0.5 per cent yesterday, with trading volumes 49 per cent below the 30-day average for the time of the day. The gauge slipped 2.1 per cent last year, with BHP Billiton, the world's biggest mining company and the nation's top oil producer, as the biggest drag.

Singapore and Hong Kong are Asia's worst-performing developed markets in 2015, with the Straits Times Index slumping 14 per cent and the Hang Seng Index sinking 7.2 per cent.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 01, 2016, with the headline 'Back-to-back annual declines for Asian stocks'. Print Edition | Subscribe