Asian markets trade lower but energy plays gain

Asian markets trade lower but energy plays gain

Asian markets began the first trading day of 2016 lower, with major markets in Australia, Japan, South Korea, and China all falling. Energy plays, however, saw gains after oil prices bounced during Asian trading hours.

In the US, major indexes closed 2015 with mixed results; the S&P 500 and Dow Jones Industrial Average registered their worst performances since 2008, but the Nasdaq ended the year higher.

The S&P 500 was 0.73 per cent lower in 2015, while the DJIA was down 2.23 per cent for the year. The Nasdaq Composite bucked trends and gained 5.5 per cent in the same period, helped by outperformance in biotech stocks and major tech names.

The Australian market erased mid-morning gains to trade lower, with the main ASX 200 index down 6.46 points, or 0.12 per cent, at 5,289.

In Japan, the Nikkei 225 was down 492 points, or 2.59 per cent, at 18,541, with most sectors trading in the red. South Korea's Kospi index, which started trade late, was down some 1.42 per cent at 1,933.

South Korea's manufacturing activity for December expanded for the first time in 10 months with the Nikkei/Markit Purchasing Managers' Index (PMI), a measure of factory activity, climbing to 50.7 on a seasonally adjusted basis, from November's reading of 49.1. A reading above 50 indicates expansion in factory activity.

Oil stocks saw a rebound, trading up on the back of higher oil prices during Asian trade. In Australia, energy stocks were trading up between 1.7 and 5.61 per cent. Japan's Inpex saw a gain of 2.07 per cent. Chinese oil plays traded mixed with PetroChina and Sinopec both trading lower.

US Crude futures were up 1.97 per cent at $37.77, trimming some of the early gains, while the internationally traded Brent was up 2.28 per cent at $38.13, getting a boost from increased geopolitical tension in the Middle East.

Evan Lucas, market strategist at spreadbetter IG, said in his morning note, "What is currently transpiring in the Middle East will be one the talking points of the year. The region hasn't been this unsettled since the second Gulf War. The difference now, however, is that the tensions are between each other."

Aside from the ongoing conflict in Syria, the escalation of tensions between Saudi Arabia and Iran will add "a layer of complexity that will make the first quarter even more volatile as the West now has a huge dilemma in choosing a side to 'support'," said Lucas.

Overnight, Saudi Arabia severed diplomatic ties with Iran over the weekend after Iranian protesters stormed Saudi Arabia's embassy in Tehran Sunday following Saudi Arabia's execution of Shiite cleric Nimr al-Nimr on Saturday.

Oil prices finished 2015 sharply lower on concerns of global oversupply, which analysts believe will continue to weigh on the commodity this year. US crude futures were down 31 per cent for the year, while Brent was 36 per cent lower.

Australian resource stocks Rio Tinto and BHP Billiton, two biggest miners in the country, were trading up 1 and 0.17 per cent.

Shares of Treasury Wine were down 1.08 per cent. Earlier, the company announced that it had completed its acquisition of Diageo's wine business in the US and United Kingdom.

Elsewhere, Dick Smith shares were halted from trade pending an announcement on the company's funding position and debt financing covenants.

In Japan, shares of Toshiba were up 2.08 per cent after reports of potential tie-ups with Sharp, facilitated by a Japanese state-backed fund, as Toshiba continues its ongoing restructuring process, following an accounting scandal in 2015.

The Nikkei business daily reported Toshiba was looking to merge its white goods segment with Sharp. Shares of Sharp were down 0.8 per cent.

Samsung Electronics shares fell 3.25 per cent after reports emerged that the company's chief executive, Kwon Oh-hyun, warned employees of challenging conditions ahead, due to low global growth and greater competition. Samsung is expected to issue earnings guidance for the fourth quarter ended December on Friday.

The Australian dollar traded lower at 0.7230 against the US dollar. The yen was higher at 119.71 against the dollar.

Chinese markets traded lower with the main Shanghai Composite down 132 points, or 3.72 per cent, at 3,407 while the smaller Shenzhen Composite was down 5 per cent. Hong Kong's Hang Seng index was also down 2.39 per cent at 21,391.

Before trade, the People's Bank of China set the yuan midpoint at 6.5032 against its previous fixing of 6.4936. The yuan traded at 6.5081 against the dollar.

Starting Monday, trading hours for the yuan on the Shanghai-based foreign exchange market will be extended. The People's Bank of China made the announcement late December; it is considered a step forward in the convergence between China's onshore and offshore rates for the yuan.

The extension allows trading in the Chinese foreign exchange market during European trading hours.

Mainland brokerages saw heavy losses in morning trade, down between 5.67 and 7 per cent.

Gaming shares in Hong Kong traded down after Macau's December gaming revenue fell 21 per cent to $2.3 billion, down for 19 straight months.

China's Caixin December manufacturing Purchasing Managers' Index (PMI), which measures factory activity, released Monday morning, was down 48.2 compared to the 48.6 in November. The Caixin PMI is a closely-watched gauge of nationwide manufacturing activity, which focuses on smaller and medium-sized companies, filling a niche that isn't covered by the official data.

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