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Wednesday, May 25, 2022

Asia: Mixed stocks on weak commodity prices, China rises thanks to New Development bank launch

LONDON (ShareCast) – (ShareCast News) – Most Asian indices fell on Wednesday, hurt by weak commodity prices and disappointing corporate earnings from Apple (NasdaqGS: AAPL – news) and Microsoft (NasdaqGS: MSFT – news) in the US. Gold futures lost 0.78% to $ 1,094.70. “Sustained trading below $ 1100 could lead to a test of support around $ 1050,” TradeNext‘s Nick Rose said.

In Japan, the Nikkei 225 index fell 1.19% Economic data published by the country’s Ministry of Economy, Trade and Industry showed all industry activity index contracted 0.5% in May from an increase of 0.1% a month earlier.

Company-wise, the Japanese conglomerate corporation Toshiba fell 1.7% on news its chief executive has resigned over a £780m accounting scandal.

Profits were inflated by more than three times Toshiba’s initial estimates. Its chief executive Hisao Tanaka, told press in Tokyo he had resigned, and chairman Masashi Muromachi would take over.

In a notice to shareholders on Monday, the technology brand apologised to shareholders and said it would promptly examine measures to prevent it ever happening again.

On a more positive note, China’s Shanghai composite index rose 0.21% following news that the BRICS countries launched New Development Bank to help developing countries.

Brazil, Russia, India, China and South Africa or BRICS emerging economies have launched the New Development Bank in Shanghai.

The international bank, which will have a capital of $ 100bn backed by the BRICS, will lend to developing countries to help address infrastructure and sustainable development needs.

NDB president Kundapur Vaman Kamath said the new bank is an “alternative to the existing US-dominated World Bank and International Monetary Fund”.

However, concerns over Chinese demand continues to weigh on investors’ minds following a massive sell-off of over 3m lots of gold in Shanghai on Monday.

In other news, Societe Generale (Paris: FR0000130809 – news) recommended in a note on Tuesday strong exposure to China equities. Its preference is for liquidity at this stage, skewed to the FTSE China A-50 index within A-shares or H-shares that are trading at a strong discount.

Meanwhile, Hong Kong’s Hang Seng was down 1.11%.

Elsewhere in Australia, the ASX index lost 1.61% after the country’s central bank governor Glenn Stevens said that further rate cuts are not off the table while cautioning about the longer term issues including excessive risk taking and excessive borrowing.

“A period of somewhat disappointing, even if hardly disastrous, economic growth outcomes, and inflation that has been well contained, has seen interest rates decline to very low levels,” Stevens said.

The consumer price index released by the Australian Bureau of Statistics rose 0.7% during the second quarter of the year, against expectations of 0.8%.

Year-on-year, CPI (Other OTC: CPICQ – news) rose 1.5%, higher than 1.3% same time last year, but missing forecasts of a 1.7% rise.

On the corporate front, mining giant BHP Billiton (NYSE: BBL – news) has trimmed its production guidance for 2016 in the face of waning prices and warned its underlying profits will be hit by a charge of between $ 350m to $ 650m from impairments and redundancies at its copper business.

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