Asian stocks erase gains and fall to 3-year low as oil resumes slump, STI up 0.1%

A share price board in Tokyo on Jan 14.
A share price board in Tokyo on Jan 14.PHOTO: AFP

WELLINGTON/SINGAPORE (BLOOMBERG) - Asian stocks erased gains to trade at a three-year low on Friday (Jan 15) as US crude fell back below US$31 a barrel.

The MSCI Asia Pacific Index reversed a 1.1 per cent advance in the morning to trade 0.1 per cent lower, with banks and energy shares leading declines. Futures on the Standard & Poor's 500 Index slid as oil extended losses. Hong Kong equities retreated, while the city's currency extended Thursday's 0.29 per cent slide that marked its steepest loss in 12 years. West Texas Intermediate crude tumbled 1.7 per cent and industrial metals fell.

Concern about the state of China's economy is dominating global markets in 2016, helping spur a US$5 trillion equity selloff and weighing on currencies in commodity-producing nations from Australia to Canada, as well as in neighboring Hong Kong. The MSCI Asia Pacific Index is trading at its lowest level since November 2012 and is headed for a second week of losses.

"The week has certainly been unpredictable and very volatile," said Geoffrey Ng, a Kuala Lumpur-based director at Fortress Capital Asset Management Sdn., which oversees US$238 million. "A lot of the Asian markets have derated and we're seeing opportunities emerge," although it's hard to gauge what the trend will be in the next few weeks, he said.

A gauge of Chinese shares in Hong Kong slumped 1.7 per cent, while the Shanghai Composite Index fell 1.5 per cent as of 11:55 am local time. New yuan loans trailed forecasts in December even as the broadest measure of new credit surged the most since June, a report showed on Friday.

Shanghai's benchmark index rallied 2 per cent on Thursday amid speculation state-backed funds were supporting equities after the gauge see-sawed earlier in the week. Earlier in the session, the index was on the brink of a bear market, falling below its lowest level reached during last August's selloff.

Japan's Topix index pared its advance to 0.2 per cent on Friday as the yen, which typically moves at odds with Japanese stocks and is a popular haven investment, strengthened 0.1 per cent to 117.90 per US dollar.

The Straits Times Index gave us earlier modest gains and was up just 0.12 per cent at 12:22 pm.

Australia's S&P/ASX 200 Index fell 0.3 per cent to extend its weekly slide to 1.9 per cent, following on from last week's 5.8 percent tumble. The Kospi index fell 0.7 per cent in Seoul.

New Zealand's S&P/NZX 50 Index advanced 0.8 per cent, while Taiwan's benchmark gauge rose 0.5 per cent.

Futures on the Standard & Poor's 500 Index dropped 0.7 per cent with those on the Dow Jones Industrial Average on Friday, while Nasdaq 100 Index contracts fell 0.9 per cent.

The S&P 500 swung back to gains on Thursday, rallying 1.7 per cent as the Dow Jones Industrial Average reclaimed more than 200 points. US stocks got a boost after Fed Bank of St. Louis chief James Bullard said the rout in energy prices may dent inflation expectations, tempering rate hike expectations.

The offshore yuan headed for a 1 per cent weekly gain. China's central bank intervened to support the exchange rate in Hong Kong after a slide in the first trading week of 2016 roiled global financial markets. Policymakers set the onshore currency's fix little changed for a sixth day on Friday.

Hong Kong's dollar slipped to 7.7850 per greenback after tumbling Thursday amid speculation the city's 32-year-old currency peg will end as investors lose confidence in Chinese assets. Authorities will closely monitor the currency's movement, Financial Secretary John Tsang said to reporters on Friday.

An index of the US dollar against 10 of its peers rose for a third week, the longest stretch since July.

WTI futures lost as much as 2 per cent to US$30.57 a barrel and are down 7.3 percent for the week. Supplies at Cushing, Oklahoma, the biggest US storage hub, rose further to a record as nationwide inventories increased, Energy Information Administration data showed Wednesday. Brent also slipped below US$30 amid signs international sanctions on Iran may be lifted Monday, allowing for a boost in oil shipments.

Base metals retreated, with copper falling 0.6 per cent on the London Metal Exchange and zinc dropping 0.6 per cent.