ASIA MARKETS: Global Oil Slump Weighs On Asian Markets

By Ese Erheriene Features Dow Jones Newswires

Australian stocks drop more than 1%, Nikkei backs off 22-month high

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Stocks were lower across the Asia-Pacific region early Wednesday, as global price declines for oil hurt energy companies, though mainland markets were resilient after MSCI Inc. said it would include Chinese stocks in its emerging-markets index.

Oil prices returned to bear-market territory overnight and the U.S. benchmark has fallen 20% from its last high point, with cuts by the Organization of the Petroleum Exporting Countries offset by increasing production elsewhere.

Australia's S&P/ASX 200 slid 1.2%, with the energy subindex off 2%. The Nikkei Stock Average was 0.2% lower, edging down from a 22-month closing high in the previous session. Inpex (1605.TO) and Japan Petroleum (1662.TO) were down 1.9% and 2.4%, respectively, with the Topix mining subindex declining 1.6%.

South Korea's Kospi was down 0.6%, the Hang Seng Index was 0.8% lower and the NZX index in New Zealand fell 0.5%.

"Oil is the main driver" for regional losses, said Tareck Horchani, head of Asia-Pacific sales trading at Saxo Capital Markets. "OPEC cuts are not having the expected effect as the shale production in the U.S. is actually growing."

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In early Asia trading, Nymex crude was last down 0.1% at $43.48 a barrel, while Brent crude was 0.2% lower at $45.92, adding to the overnight declines.

Meanwhile, positive sentiment due to the inclusion of Chinese stocks in the MSCI's emerging-market index was just enough to offset outflows from the energy sector. However, gains were limited, as the MSCI decision had been priced in, analysts said.

The Shanghai Composite Index was last up 0.1% and stocks in Shenzhen were 0.2% higher.

"China's entry into the MSCI global indices is a historic milestone," although challenges remain, said Hao Hong, managing director and head of research at Bocom International.

Worries linger that China's domestically traded A-shares are overvalued when compared with global levels. In addition, there are concerns about whether China's volatile market will adapt to international best practices.

Meanwhile, financial stocks across the region also faced selling pressure, with local weakness exacerbated by dovish comments from central banks in the U.K. and U.S. Japan's Topix bank subindex was 1% lower, while the Hang Seng finance subindex was down 8%. In Australia, the 'big four' banks -- Westpac Banking (WBK) , Commonwealth Bank of Australia (CBA.AU) , National Australia Bank (NABZY) , and Australia and New Zealand Banking (ANZ.AU) -- fell between 1.2% and 2.1%.

In currencies, the offshore yuan gave up most of the gains accrued in the wake of MSCI's decision. The U.S. dollar-yuan was recently trading at 6.8206, compared with 6.7164 before the MSCI news, a near nine-month high for the Chinese currency.

Speculation that demand for the yuan is coming from investors seeking to buy Chinese shares is premature, notes Stephen Innes, head trader for Asia at Oanda. Investors are "laying the groundwork," but any actual buying of either the yuan or Chinese shares is a long way off, he said.

(END) Dow Jones Newswires

June 20, 2017 23:04 ET (03:04 GMT)