Stocks were broadly lower in Asia on Friday, primarily impacted by news of the assassination of former Pakistani prime minister Benazir Bhutto. In addition, trading was seasonally light again with only a few days remaining in 2007.
1. Although Indian ADRs and funds dropped on Thursday in reaction to Bhutto's assassination (full story), India's BSE Sensex 30 ended lower by only 0.05% to 20,206.95 and its intra-day low was limited to a loss of less than 1%.
- Regarding the near-global selloff of equities Thursday and into Friday, a Mumbai-based brokerage director says, "You will definitely have some knee-jerk reaction because it's a major political event. But I see from my past experience that whenever such events happened and the markets dipped, the rally thereafter is extremely sharp." (MarketWatch)
2. The Nikkei 225 lost 1.7% and TOPIX fell 1.6% in a half-day session, the last of the year. 2007 was a disappointing year for Japanese equities, with the Nikkei's 11% decline its first annual loss in five years.
- Japan's inflation rose 0.4% in November, the highest rate since 1998. Household spending was off 0.6%. Industrial production dipped 1.6%, while inventory levels rose by 1.6%. Unemployment fell to 3.8% compared to 4% in Oct. (Bloomberg)
3. Japan's mega banks continued to face selling pressure: Mitsubishi UFJ FG (MTU) (JP: 8306) -3.2% to ¥1,047, Mitsui Sumitomo FG (SMFJY.PK) (JP: 8316) -3.1% to ¥837,000 and Mizuho FG (MFG) (JP: 8411) -2.9% to ¥534,000.
- Consumer electronics stocks also struggled: Canon (CAJ) (JP: 7751) -2.6% to ¥5,200, Matsushita (MC) (JP: 6752) -2.3% to ¥2,315 and Sony (SNE) (JP: 6758) -2.2% to ¥6,200.
- Toyota (TM) (JP: 7203) fell 2% to ¥6,040, extending its ytd loss to 24%, its worst return since 2000.
- A weak 2007 makes Japanese stock valuations compelling and combined with rock bottom expectations, among other things, there may be a bull story lurking.
4. The yen strengthened against a basket of 14 of the 16 most actively traded currencies, as traders pared bets on increased geopolitical risk and/or preempted expectations of carry trade reductions.
5. The Hang Seng fell 1.7% to 27,370.60 in another session characterized by light trading. The Shanghai Composite was off 0.9% to 5,261.56. A Hong Kong-based Societe Generale Securities trader commented, "In the greater scale of things, the death of Bhutto doesn't make any difference to HSBC or China Mobile, or any other Hong Kong stock for that matter. But sentiment-wise it creates uncertainty and unease in investors' minds." (MarketWatch)
