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01 March 2024

Most Asia markets down after New Year rally but Hong Kong runs on


The rally across Asia that welcomed in 2018 looked to have run out of steam on Wednesday with most markets slipping into the red on profit-taking but energy shares climbed with another surge in oil prices.

Strong economic fundamentals and corporate earnings as well as optimism about the impact of Donald Trump's massive US tax cuts have helped fuel a global advance to record or multi-year highs.

However, some analysts say the surge has also been propelled by a fear of missing out, and with the next round of company reports about to kick off traders are taking a breather before making their next moves.

"You have to ask yourself what has changed really in these first six trading days of 2018, which has so materially driven prices higher?" asked Greg McKenna, chief market strategist at AxiTrader.

"For me, the rally is starting to feed on itself, or people's fear of not participating in the upside, despite the fact that I also believe the global growth outlook and the impact of US tax cuts is a positive."

Tokyo ended the morning session 0.2 percent down, Sydney shed 0.5 percent, while Singapore and Seoul each gave up 0.3 percent. Wellington lost 0.7 percent and Taipei 0.2 percent.

However, Hong Kong continued its outstanding run by rising 0.1 percent -- a twelfth successive gain -- while Shanghai was up 0.2 percent, for a ninth straight advance.

Despite the losses on broader markets, energy firms stood out as oil pushed higher.

Crude has more than doubled from its lows below $30 back in early 2016, supported by an output freeze deal between OPEC and Russia and, recently, tensions in the oil-rich Middle East.

Market-watchers say unrest in key producer Iran could dent the country's capacity, while others point out that any suppression of protests by Tehran could also lead Trump to reimpose export sanctions.

- Yen up on BoJ move -

Both main oil contracts jumped more than one percent on Tuesday, also helped by data showing a huge drop in US stockpiles as a big freeze in the northeast fans demand for heating fuel.

That has helped petroleum-linked firms. In Hong Kong CNOOC, PetroChina and Sinopec were all up around two percent while Inpex in Japan rose almost three percent.

The dollar weakened against the yen a day after the Bank of Japan said it would cut back on its purchasing of bonds as part of its huge stimulus programme.

While not a massive reduction, the move indicates a trend to normalisation that brings Japan into line with others around the world. The greenback has struggled in recent months on expectations central banks are beginning to tighten monetary policy, closing the gap with the Federal Reserve.

The greenback held onto gains against the Chinese yuan after the central People's Bank of China made a technical tweak to its exchange mechanism that reduces some of its control over the unit.

The dollar bought 6.5278 yuan, compared with a low of 6.4975 on Tuesday, though it is still well down from the levels near 7.0 yuan seen around the beginning of last year.

The move raised fears the PBoC would depreciate the currency as it did in 2015, spurring a global market panic, though analysts pointed out the move was more technical.

"This policy shift is far from a repeat of the iron-fisted PBoC moves from yesteryear. But it does appear the central bank's not- so-invisible hand was at work curbing the rapid appreciation of the yuan," said Stephen Innes, head of Asia-pacific trading at OANDA.

- Key figures around 0250 GMT -

Tokyo - Nikkei 225: DOWN 0.2 percent at 23,796.45 (break)

Hong Kong - Hang Seng: UP 0.1 percent at 31048.84

Shanghai - Composite: UP 0.2 percent at 3421.22

Euro/dollar: DOWN at $1.1935 from $1.1937 at 2140 GMT

Pound/dollar: DOWN at $1.3529 from $1.3539

Dollar/yen: DOWN at 112.25 yen from 112.61 yen

Oil - West Texas Intermediate: UP 47 cents at $63.43 per barrel

Oil - Brent North Sea: UP 39 cents at $69.21 per barrel

New York - DOW: UP 0.4 percent at 25,385.80 (close)

London - FTSE 100: UP 0.5 percent at 7,731.02 (close)