Investment rationale turned bleak today as investors mainly focusing on the third gathering for the euro zone finance chiefs to discuss whether to release Greece's next tranche of aid and find an suitable way with the IMF to make the debt-wracked economy come back to its fiscal health. Traders are worried that another failure to unfreeze the Greek aid tranches would have a negative impact on the sentiment globally and might push cyclical assets toward southward journey.
Traders are in doubt whether Monday's meeting would reach a final decision on Greece, after Greek daily Ekathimerini said that finance ministers might have to postpone an agreement until a regular Euro Group meeting in early December. According to news reports, while weekend teleconferences were pretty smooth, there's a possibility that EU finance minister won't actually get firm agreement on how to get Greek debt to sustainable levels until the next Euro Group meeting on December 3rd,
On Saturday, Euro zone finance ministers held a conference call to prepare for today's summit. It's reported that they came up with a way to make up EUR 10 billion to fill the financing gap due to the two year extension. That includes measures like lowering interest rates on the bailout fund, debt buyback and applying central bank profits on Greek bonds. However, it's also reported that the idea to lower interest rates was a main show-stopper to cutting the deal.
French finance minister Moscovici said over the weekend that they are very close to a solution for Greece and it would be irresponsible not to reach an accord given all the efforts that have been made on all sides.
Market sentiment also weakened amidst political uncertainty in Spain after separatist parties in Spain's Catalonia region won the majority of the public vote in elections held over the weekend. The win underlined fears about a potential negative impact on the euro zone's fourth largest economy, as Catalonia accounts for nearly 20% of economic activity and provides the most tax revenue to the central government. The political uncertainty along with the bad fiscal situation in Spain will put immense pressure on Prime Minister Mariano Rajoy who may have to delay a decision on formally requesting a bailout.
On the other hand, eyes will continue to track the debate about the U.S. fiscal cliff when U.S. officials meet this week to avert spending cuts and tax hikes worth $600 waiting for the world`s no.1 economy in 2013.
In the Asia Pacific Market, Australian shares closed slight higher, tracking cues from positive finish of Wall Street last Friday, although investors were cautious ahead of talks on Greece. The broader All Ordinaries gained 12 points, or 0.3%, to 4443.5 after being confined to a narrow range. Mining stocks are well supported, thanks to gains in commodity prices on Friday. BHP Billiton jumped 0.8% while Rio Tinto traded relatively flat at A$57.21. Iron ore miner Fortescue added 3.3%.
Tokyo market closed slight higher, although trimmed earlier gains, with the benchmark Nikkei Stock Average up by 0.24% to 9,388.94, a level not seen since April 27, helped by gains in exporters, including automakers and precision instruments makers. Investment rationale was buoyant by yen weakening against the basket of major currencies and on expectations of strong US sales during the year-end shopping season.
Utility players were sharp higher today, led by Kansai Electric Power and Kyushu Electric Power, both surged 5.3% at 754 yen and 5.3% at 812 yen, respectively on reports that the pair will likely apply to the government for usage rate increases for electricity supplied to households, possibly applicable as early as April.
Exporters, including automakers and precision equipment makers, continued northward journey for another day today after the Japanese currency fell to further low against the dollar on and the euro. A weaker currency boosts the value of overseas income at Japanese companies when repatriated as well as boosting their competitiveness.
Among exporters, Toyota Motor Corp advanced 1.7% to 3,575 yen and Nissan Motor Co 2.3% to 806 yen. Honda Motor Co added 0.6% to 2,766 yen and Hino Motors 3.1% to 708 yen. Canon Inc added 0.2% to 2,917 yen and Toshiba Corp 1.4% to 294 yen. Fanuc Corp added 0.3% to 14,040 yen.
Renesas Electronics sparkled 17% to 337 yen on reports that the firm's top shareholders have agreed to a buyout proposed by the government-backed Innovation Network Corp of Japan (INCJ). The INCJ will pay more than 180 billion yen for two-thirds of Renesas shares, while a group of clients including Toyota, Nissan, and Canon will invest more than a combined 10 billion yen, according to news reports.
Sony Corp declined and Panasonic Corp both declined 1.9% to 818 yen and 0.3% to 406 yen, respectively, on rating downgrade from Fitch. Fitch cut Panasonic's rating by two notches to BB and Sony three notches to BB minus on Friday. Panasonic Corp. has a better chance than rival Sony Corp. of surviving Japan's consumer electronics slump because of its unglamorous but stable appliance business of washing machines and fridges, credit rating agency Fitch said.
China market closed lower today, as investors began dumping cyclical assets late afternoon to lock in short-term gains amidst cautious ahead of talks on Greece later today and release of key domestic economic data, including domestic industrial profits tomorrow, with bearish alcoholic shares led retreat. The benchmark Shanghai Composite Index was 0.5% down, while the Shenzhen Component Index dropped 0.8%.
Shares of alcohol makers declined today, with JiuGuiJiu led downtrend, locking 10% lower circuit at 38.54 yuan after the spirit maker apologized on last Thursday to consumers and investors in a stock exchange filing and said it is co-operating with requests from the provincial quality watchdog to run strict checks on its distribution and packaging processes. Kweichow Moutai Co, a leading producer of high-end liquor in China, dropped 2.3% to 217.05 yuan, while Sichuan Tuopai Shede Wine Co erased 5.7% to 22.56 yuan and Shanxi Xinghuacun Fen Wine Factory Co 2.7% to 36.85 yuan.
Hong Kong stocks finished tepid session slight lower after moving in narrow range, with the benchmark Hang Seng index slid 0.24% from previous session closure to 21,861.81, as investors locked in short-term gains amidst cautious ahead of the outcome of a meeting between European finance ministers to determine the next move on Greece's debt.
Among the 49 Hang Seng blue chips, 28 decline 19 and advanced, while 2 unchanged. Belle International Holdings advanced 3.1% to HK$16.18, while Tencent Holdings declined 1.6% to HK$252.40, making them the top blue-chip gainer and loser respectively. HSBC Holdings was down 0.1% to HK$77.10. China Mobile declined 0.5% to HK$87.55. Cathay Pacific Airways declined 0.9% to HK$13.76 on Deutsche's bearish report. Esprit Holdings advanced 2.8% to HK$12.58 as Michael Ying becoming the controlling shareholder again
Indian indices was trading in narrow range late afternoon, with the barometer index, BSE Sensex, up around 0.2% at 18,539 at 2:50 PM IST, on hopes the reserve bank will announce a bond purchase program for this week to improve liquidity condition. However, upside was capped amidst caution over the winter session of the parliament where key reform bills are pending for approval.
Indian index heavyweight and cigarette maker ITC was flat. Another index heavyweight Reliance Industries (RIL) hovered in positive terrain. Realty stocks edged higher on renewed buying. Jet Airways surged on news that the company is likely to announce stake sale with Eithad Airways in 45 days. Ranbaxy Laboratories gained after Ranbaxy Laboratories' (RLL) wholly owned subsidiary Ranbaxy Laboratories Inc announced the sales and promotion launch of Absorica (Isotretinoin) Capsules in the United States (US).
Elsewhere, Indonesia's Jakarta Composite added 0.6%; New Zealand's NZX50 was edge 0.09% p; Singapore's Strait Times Index added 0.5%; and Taiwan's Taiex jumped 1.1%; while Malaysia's KLSE Composite fell 0.4% and South Korea's Kopi index slipped 0.2%.
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