By Ese Erheriene
Stocks fell across the Asia-Pacific region Wednesday, as global price declines for oil hurt energy companies, though equities in China were resilient after MSCI Inc. said it would include Chinese stocks in its emerging-markets index.
Oil prices returned to bear-market territory and the U.S. benchmark has fallen 20% from its last high point, with cuts by the Organization of the Petroleum Exporting Countries offset by increasing production elsewhere.
Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO +1.51% slid 1.6%, with the energy subindex more than 2%. The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK +0.51% closed 0.5% lower, edging down from a 22-month closing high in the previous session. Inpex /zigman2/quotes/206689846/delayed JP:1605 +1.15% and Japan Petroleum /zigman2/quotes/201212147/delayed JP:1662 +1.53% ended 1.2% and 1.8% lower, respectively, with the Topix mining subindex declining.
South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.27% finished lower by 0.5%, the Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -0.32% was 0.6% lower and the NZX index /zigman2/quotes/211587880/delayed NZ:NZ50GR +0.92% in New Zealand fell 0.8%.
“Oil is the main driver” for regional losses, said Tareck Horchani, head of Asia-Pacific sales trading at Saxo Capital Markets. “OPEC cuts are not having the expected effect as the shale production in the U.S. is actually growing.”
Meanwhile, positive sentiment due to the inclusion of Chinese stocks in the MSCI’s emerging-market index was just enough to offset outflows from the energy sector. However, gains were limited, as the MSCI decision had been priced in, analysts said.
“China’s entry into the MSCI global indices is a historic milestone,” although challenges remain, said Hao Hong, managing director and head of research at Bocom International.
Worries linger that China’s domestically traded A-shares are overvalued when compared with global levels. In addition, there are concerns about whether China’s volatile market will adapt to international best practices.
Meanwhile, financial stocks across the region also faced selling pressure, with local weakness exacerbated by dovish comments from central banks in the U.K. and U.S. Japan’s Topix bank subindex fell, while the Hang Seng finance subindex fell 8% intraday. In Australia, the ‘big four’ banks — Westpac Banking /zigman2/quotes/203084975/delayed AU:WBC +7.39% , Commonwealth Bank of Australia /zigman2/quotes/200638713/delayed AU:CBA +3.01% , National Australia Bank /zigman2/quotes/210431826/delayed AU:NAB +6.86% , and Australia and New Zealand Banking /zigman2/quotes/205482049/delayed AU:ANZ +6.28% — fell between 1.8% and 2.9%.
In currencies, the offshore yuan gave up most of the gains accrued in the wake of MSCI’s decision. The U.S. dollar-yuan /zigman2/quotes/210561991/realtime/sampled USDCNY 0.0000% traded at 6.8206, compared with 6.7164 before the MSCI news, a near nine-month high for the Chinese currency.
Speculation that demand for the yuan is coming from investors seeking to buy Chinese shares is premature, notes Stephen Innes, head trader for Asia at Oanda. Investors are “laying the groundwork,” but any actual buying of either the yuan or Chinese shares is a long way off, he said.