Stocks remain under pressure

Written by InsiderAsia
Thursday, 10 December 2009 17:28

Asian stocks stayed under pressure on Thursday, Dec 10. Bellwether indices in Japan, Hong Kong and Singapore ended in the red. Although the FBM KLCI stayed in positive territory, market breadth was in the red throughout the trading day.

There is little reason to buy into equities at the moment, particularly with the slew of negative news over the past few days. Markets appear likely to remain lacklustre in the near term.

Jitters over mounting debt globally, initially triggered by Dubai World’s debt moratorium and followed by downgrades for the sovereign credit rating of Greece and six other state-linked entities in Dubai, was further compounded after Standard & Poor's cut its credit outlook for Spain.

Spain is among the worst hit countries in the Eurozone during this downturn. It is facing mounting debt-to-GDP while unemployment has risen to a massive 19.3%.

Growing uneasiness over credit worthiness may raise investors' risk aversion and dampen the rally in higher-yielding, riskier assets.

There was further bad news out of Japan today. Machinery orders in the world’s second-largest economy, a closely watched indicator of corporate capital spending, dipped 4.5% in October from the preceding month. This suggests that companies are reigning in spending as the recovery slows. Earlier this week, Japan slashed its annualised GDP for 3Q2009 to 1.3% from the initial estimate of 4.8%.

Uncertainties over the strength of the global recovery sent crude oil prices below US$71 per barrel in electronic trading on the New York Mercantile Exchange Thursday.

On the local bourse, the benchmark FBM KLCI finished four points higher at 1,259.9 but losing counters outpaced gaining ones by a ratio of roughly six to five at the close. Trading volume dropped to 572 million shares as investors retreated to the sidelines pending greater clarity on the global economic outlook.