Asian stocks set to end week with tiny gains but outlook grim, STI down 0.7%

A pedestrian walking past an electronic monitor displaying stock indices outside a securities firm in Tokyo, Japan.
A pedestrian walking past an electronic monitor displaying stock indices outside a securities firm in Tokyo, Japan. PHOTO: BLOOMBERG

HONG KONG (REUTERS) - Asian stocks firmed on Friday (Oct 2) and appear set to end the week higher, although the outlook remained grim as investors continued dumping emerging market assets as their growth expectations faded. The US dollar crept higher.

Financial spreadbetters expect Britain's FTSE 100 to open 0.3 per cent up, Germany's DAX to open 0.4 per cent higher, and France's CAC 40 to open 0.6 per cent up.

Hong Kong stocks led the region's gainers with a 2.6 pe rcent rise, lifted by a bounce in the Chinese Enterprise Index which tracks Chinese companies listed in Hong Kong, after latest policy steps to shore up the flagging economy.

The Straits Times Index was trading down 0.74 per cent at 2,781.23 as of 1:55 pm.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent, and was on track for a weekly gain of 1.2 per cent. It posted its poorest quarterly performance with a decline of 17 per cent, the worst since 2011.

Australia's shares fell 1.1 per cent while Japan's Nikkei Average fell 0.4 per cent. China is shut for a week-long holiday and India is closed for a local holiday.

Beijing on Wednesday said it would cut the minimum down payment level for first-time home buyers in many cities, the second policy measure in two days to fire up Chinese consumption.

"Even if this might not have much impact on property prices, it shows the central government has policy intentions to boost GDP growth," said Castor Pang, head of research at Core Pacific-Yamaichi in Hong Kong.

However, a number of economists pointed out the broader economic outlook for the region remained bleak.

"The difference between new orders and inventories is a good leading indicator for industrial production in Asia," said Frederic Neumann, co-head of Asian economics research at HSBC in Hong Kong. "Unfortunately, this signals a further deceleration of activity into the year-end."

In line with falling economic activity, earnings growth expectations for the remainder of the year for MSCI Asia-ex Japan have been slashed to their lowest levels this year, according to Thomson Reuters data.

Net non-resident portfolio flows to emerging markets were negative for the third consecutive month in September, with investors estimated to have pulled out US$40 billion worth of funds in the third quarter, making it the worst since December 2008, according to the Institute of International Finance.

Nowhere was this flight from emerging market assets more evident than in the bond markets with a spread measuring the gap between US high yield and investment grade debt at its highest level in more than three years at 430 basis points, according to Thomson Reuters data.

In foreign exchange markets, the US dollar is holding its own against other currencies before a key US jobs report that could determine the chances of the Federal Reserve raising interest rates before year-end.

Economists expect US nonfarm payrolls, due later in the global day, to show that employers added 203,000 jobs in September, according to a Reuters poll.

"A very bullish report would of course have a big impact. But the Fed may not make its rates decision on employment data alone," said Shinichiro Kadota, chief Japan FX strategist at Barclays in Tokyo.

The US dollar was buying 119.96 yen, broadly flat from late US trading, while the euro was steady at US$1.11760.

The dollar index, which tracks the greenback against a basket of six rival currencies, was down about 0.1 per cent at 96.220.

US crude futures were up about 1.1 per cent at US$45.23 a barrel, after a choppy session in which traders monitored the unpredictable path of storm Joaquin, and whether it would strike the New Jersey coast and possibly disrupt refineries there. Brent crude was up about 1 per cent in Asian trading at US$48.00 a barrel.