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Asian Markets at Close Report

European Markets at Close Report

Dec 30, 2016

Asian Markets at Close Report on December 30, 2016: Asian Stocks Rise Ahead of New Year's Weekend

marketwatch.com

Kenan Machado


Asia’s equity markets ended 2016 slightly higher, despite a number of unexpected global events that had threatened to throw markets into disarray.

With China the main exception, major Asian stock markets rose for the year. Australia’s S&P/ASX 200 XJO, -0.58%  rose 7%, while both Japan’s Nikkei Stock Average NIK, -0.16%  and Hong Kong’s Hang Seng Index HSI, +0.96%  added 0.4%. Singapore’s Straits Times Index rose 0.2% STI, -0.29%  for the year.
Among smaller markets, particularly those in Southeast Asia, performance was more mixed, with benchmark indexes in Malaysia, Vietnam and the Philippines ending the year in the red.
Thailand’s benchmark SET 50 index SET, +0.87%  was an outperformer, with the index on gaining 18.6% for the year, even as investor buying interest paused after the death of the country’s long-reigning monarch in October.
“We are seeing a Goldilocks scenario in global markets,” said Khiem Do, head of Asian multiasset investments at Baring Asset Management.
Corporate earnings have been picking up, prompting investments, he said. In addition, Do said that toward the second half of the year, investments in fixed-income assets started moving to equities, helping global markets.
Still, there were a number of global surprises that affected Asia’s equity markets, including the Brexit vote in June and Donald Trump’s victory in the U.S. presidential election in November.
Read: How Trump and Brexit are shaking up investment portfolios for 2017
Even more surprising, analysts say, was the stock-market rally that followed Trump’s win. That was opposite earlier expectations of what would happen in the event of a Trump win, said Andrew Sullivan, managing director of sales trading at Haitong International Securities.
“People have become more cautious and acting on fact rather than rumor,” Sullivan said
Meanwhile, the Shanghai Composite Index SHCOMP, +0.24%  tanked 12.3% for the year, as regulators there cracked down on leveraged purchases of stocks by insurance companies and as the yuan USDCNY, -0.1653%  fell about 6.5% against the U.S. dollar for the year.
To be sure, China’s declines could have been much steeper. In January, the Shanghai index plunged as much as 25%, as a circuit-breaker mechanism for the stock market, introduced to reduce volatility, set off a global market panic, forcing authorities to shelve the system.
Malaysia’s Bursa index BURSA, +1.14%  ended down 3.7% for the year, suffering from the controversy surrounding the Malaysian state investment fund known as 1MDB.
Though not considered one of Asia’s main markets, Pakistan’s benchmark KSE 100-stock KSE100, +0.51%  as on track to become the biggest gainer this year, with a 45.3% surge after its inclusion in the MSCI Emerging Markets Index in June.
However, on Friday, the last trading session of 2016, a weaker dollar DXY, -0.40%  early in the day sent local currencies higher, hurting the competitiveness of exports in the region.
The greenback later recovered to trade 0.4% higher compared with the yen. But that wasn’t enough to stave off the decline in export stocks such as Honda Motor 7267, -0.81%  , which dropped 0.8%; Nissan 7201, -0.42%  , which ended down 0.4%; and Sony 6758, -0.73%  , which fell 0.7%.
Toshiba 6502, +9.43%  , however, gained 9.4%, after analysts pointed out that the stock was oversold on worries of rising expenses at its U.S. nuclear-power unit.
Elsewhere in the region, the weaker dollar DXY, -0.40%  helped soften the blow of a weakening yuan that has weighed on Chinese stocks. The Shanghai Composite Index ended 0.2% higher on Friday, with Hong Kong’s Hang Seng Index adding 1%.
The weaker dollar could temporarily help stem capital outflows from China, analysts said.
However, the long-term outlook is for the yuan to weaken, said Hue Lu, a senior investment specialist at BNP Paribas Investment Partners in Hong Kong. China allows its nationals to exchange up to $50,000 worth of yuan per person a year. “If mainlanders feel less confident about the renminbi, they are going to take advantage of the quota,” she said.