Asia shares open lower as China, oil weigh on sentiment

Asia shares open lower as China, oil weigh on sentiment

Stock markets in Asia opened weaker Thursday, with concerns over China's economic slowdown and its depreciating currency as well as falling oil prices weighing on sentiment.

The Australian market was nearly flat, with the ASX 200 down 0.4 per cent, with the energy sector taking a 2 per cent hit in morning trade. In Japan, the Nikkei 225 traded 0.40 per cent lower, while Korea's Kospi saw early losses of 0.05 per cent.

Energy plays Down Under traded lower on the back of lower oil prices, with Woodside shedding 2.1 per cent and Santos losing 3.1 per cent. In Japan, Inpex and Japan Petroleum were down 2.5 and 1.09 per cent respectively.

Tensions in the Middle East and a buildup of gasoline inventory stateside sent oil prices tumbling during US trading hours. West Texas Intermediate (WTI) crude futures were down $2, or 5.56 per cent, at $33.97 a barrel, hitting their lowest level since December 2008. The global benchmark, Brent crude, was down 5.93 per cent at $34.26 a barrel, an early June 2004 trough.

Resources producers in Australia traded mixed, withRio Tinto and BHP Billiton seeing early losses of 1.57 and 2.22 per cent respectively. Gold miners, on the other hand, saw an uptick in their stocks, with Alacer Gold tacking on 4.71 per cent and Newcrest adding 1.3 per cent.

Gold, a safe-haven investment during times of economic uncertainty, hit a seven-week high, with spot prices up 1.5 per cent at $1,093.63. It was the highest level since November, when prices peaked at $1,095.30.

In Japan, major exporters such as Toyota, Nissan and Sony traded down between 0.5 and 4.49 per cent. Exporters can be hit when the yen strengthens as it weighs on repatriated earnings. The Japanese yen, considered a safe-haven currency, traded slightly lower against the dollar from the previous session, with the dollar-yen pair at 118.57.

Reports in Japan said Sony and Fujifilm were considering a joint bid to acquire Toshiba's medical equipment subsidiary, Toshiba Medical Systems, as the troubled electronics company continues with its restructuring. Among other reported bidders are Hitachi, Canon, General Electric's healthcare business, and the Samsung group.

Toshiba shares were up 1 per cent.

In Korea, the tech sector saw some early losses with shares of Samsung Electronics, Samsung SDI and SK Hynix in the red.

South Korean defence stocks, which saw sharp upticks in the previous session following reports of North Korea's purported nuclear test traded lower, falling between 3.33 and 7.5 per cent.

North Korea's claim on Wednesday that it had successfully tested a hydrogen bomb sparked fresh geopolitical concerns in the Korean peninsula and led to global condemnation of the isolated Communist country. The incident did not appear to have an immediate impact on stock prices in the region.

China remained a worry for investors after Wednesday's Caixin Purchasing Managers' Index (PMI), a measure of activity for the services sector, showed a slowdown in the pace of growth.

The country is undergoing a structural rebalancing from a manufacture-oriented to a service-oriented economy, so services sector growth is a key sign of success. The Caixin/Markit Purchasing Managers' Index (PMI) for December fell to 50.2, from November's 51.2. A reading over 50 indicates expansion in activities in the sector.

Toby Lawson, head of global markets in Australia at Societe Generale Newedge, told CNBC's "The Rundown" the People's Bank of China (PBOC) needs to more consistent in their policy decisions to retain investor confidence.

"The key for investors is to see some transparency, some consistency from the PBOC in terms of its decision-making, its policies in relation to yuan revaluation, fiscal spending and monetary policy," said Lawson, adding, "If we get consistency, investors feel more confident that Chinese authorities are in control of the declining growth of their economy."

The record widening of the yuan's onshore and offshore exchange rates also sparked concerns over Beijing's undertaking to let the Chinese currency trade more freely.

While Lawson said he expects further devaluation of the onshore yuan, which is more tightly controlled by Beijing, he added that it will be done "in a controlled fashion by the PBOC."

On the data front, Australia will release its November trade data. The resource-oriented economy had a tough last year due to tumbling iron ore and coal prices. But some of that pain was offset by a lower Australian dollar, which helped to boost export revenues.

Shane Oliver, chief investment strategist at AMP Capital, said in a note that he expected the November trade deficit to show a slight improvement.

Major indexes in the US closed more than 1 per cent down, with the Dow Jones Industrial Average shedding 252.15 points, or 1.47 per cent, at 16,906.51. The S&P 500 closed down 26.45 points, or 1.31 per cent, at 1,990.26, with energy leading all 10 sectors lower. The Nasdaq Composite closed down 55.67 points, or 1.14 per cent, at 4,835.76.

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