Strong Dollar Upends Asian Markets -- 2nd Update
October 21 2016 - 5:13AM
Dow Jones News
By Kenan Machado
A strong dollar sent Asian shares broadly lower on Friday, with
the Nikkei reversing gains in the late session after an earthquake
rocked Western Japan.
The Nikkei Stock Average ended down 0.3%, erasing the 0.6% gains
made earlier in the day, though the extent of damage caused by the
magnitude 6.6 earthquake wasn't immediately clear.
Even so, the Nikkei ended the week up nearly 2%, thanks to
robust corporate earnings results and a weaker yen.
Elsewhere in the region, Korea's Kospi fell 0.4% and Singapore's
Straits Times Index was also off by 0.4%.
Among the day's bigger winners in Japan, industrial machine
maker Yaskawa Electric rose 2.1%, after it kept its profit
expectations for the full year unchanged despite weaker earnings
for the first half that ended in September.
"Concerns about earnings deterioration are easing," said
Yoshinori Ogawa, a strategist at Okasan Securities.
Meanwhile, shares in videogame maker Nintendo closed down 6.6%,
after the company introduced its next videogame platform: a
console-handheld hybrid called "Switch," which will compete with
Sony's PlayStation and Microsoft's Xbox. Investors were
disappointed that the company didn't instead pursue developing
games on rival platforms or for mobile phones.
Japanese stocks were higher earlier in the session amid the
yen's further weakness, thanks largely to the strength of the U.S.
dollar. The WSJ Dollar Index, which tracks the currency against 16
other currencies, was up 0.2% at 88.50 in late Asian trade.
On Friday, the U.S. dollar hit a record high against the freely
traded yuan in the offshore market, and was last up 0.3%. The
dollar was 0.2% stronger by against the onshore yuan, after earlier
touching a fresh six-year high.
Most of the dollar's strength came from the euro's weakness and
higher expectations of an interest-rate increase by December.
"It is the pace of change in the dollar market that is a cause
of concern," said Chris Weston, chief market strategist at IG. A
stronger dollar hurts returns that U.S. investors earn on overseas
investments. The greenback is expected to keep gaining strength
until December, say analysts. "A Fed hike in December is more of a
mainstream view now," said Mr. Weston.
In China, the yuan's weakness stoked fears of a renewed cash
exodus, as was the case after Beijing depreciated the currency in
August last year. At the same time, China's housing market
continues to sizzle, with home prices rising in 63 of 70 cities in
September from the previous month. Average new home prices rose
1.8% in September, versus a 1.3% gain in August.
As a result, Chinese stocks were under pressure, with traders
balancing yuan declines with the strong China housing price
data.
"Investors are on the fence as to whether to divert funds from
properties to equities," said Zhang Xin, an analyst at Guotai Junan
Securities.
The benchmark Shanghai Composite Index, however, recovered in
late trade to end up 0.2% while the Shenzhen Composite Index ended
down 0.4%. Hong Kong's stock market was closed Friday as the city
was shut down due to a typhoon.
The stronger dollar also weighed on oil, adding pressure after
statements from Russia about increasing production. Rosneft, the
world's biggest oil producer, noted that it could raise production
significantly, according to analysts.
"They suggested that if demand was there, they could raise
output by as much as 4 million barrels a day," said ANZ in a note
to clients. This was at odds with Russia's previous stance of a
joint production cut with the Organization of the Petroleum
Exporting Countries.
Among major energy stocks, shares in Australia's Oil Search
declined 2.3%, while Woodside Petroleum fell 0.9%, dragging
Australia's S&P/ASX 200 down 0.2%.
Kosaku Narioka, Tom Fairless, Yifan Xie, Hiroyuki Kachi,
Dominique Fong and Jenny Hsu contributed to the article.
Write to Kenan Machado at kenan.machado@wsj.com
(END) Dow Jones Newswires
October 21, 2016 04:58 ET (08:58 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.