Asia: Stocks poised for 2nd year of decline on commodity rout

[SINGAPORE] Asia-Pacific stocks fell in light trading on the final day of the year, with the regional benchmark index heading for its first back-to-back annual decline since 2002, as energy shares followed crude oil lower.

The MSCI Asia Pacific Index excluding Japan slipped 0.1 per cent to 410.54 as of 8:10 am in Hong Kong, with raw- material companies leading declines.

Markets in Japan, Indonesia, Korea, Philippines and Thailand are closed for holidays while those in Australia, New Zealand, Hong Kong and Singapore have shortened trading.

Australia's S&P/ASX 200 Index was little changed, with trading volumes 56 per cent below the 30-day average for this time of the day. New Zealand's S&P/NZX 50 Index rose 0.1 per cent. Markets in China and Hong Kong have yet to start trading.

The MSCI gauge that includes Japan is headed for a 4.5 per cent drop this year amid decelerating Chinese growth and a rout in commodities. That compares with a 0.2 per cent advance for the Standard & Poor's 500 Index and a 7.4 per cent increase for the Stoxx Europe 600 Index.

"This year has been a very volatile and difficult year as the markets were assaulted by volatility from different asset classes," said Kelvin Tay, regional chief investment officer at UBS's wealth management business in Singapore.

"The sharp selloff in the commodities market badly affected the Asian currency markets, especially South-east Asian currencies and equities. China's economy will have a soft landing in 2016."

Energy and raw-material producers led declines on the MSCI Asia Pacific Index this year as sentiment has turned negative after a decade-long bull market that was driven by China's hunger for crops, metals and fuel. Producers rushed to meet that demand, resulting in expanded supplies that are now causing gluts as the world's second-largest economy grapples with the weakest growth in a generation.

China's gross domestic product will slow from an estimated 6.9 per cent growth rate this year to 6.5 per cent next year, according to a Bloomberg survey. The nation's manufacturing sector probably contracted for a fifth straight month in December, according to the median forecast of analysts in a separate Bloomberg survey. The official purchasing managers index is due to be released by the National Bureau of Statistics on Jan 1.

Chinese shares in Hong Kong extended the biggest sell-off in Asia this year on concern the nation's deepening economic slowdown will sap corporate earnings. The Hang Seng China Enterprises Index slipped 1.3 per cent on Wednesday, poised for a 19 per cent slump this year. The Shanghai Composite Index added 0.3 per cent, extending its 2015 advance to 10 percent.

The Hang Seng China gauge has decoupled from mainland equities this year for the first time in a decade as the government intervened to support shares in Shanghai and Shenzhen and foreign investors turned bearish on the nation's earnings prospects.

E-mini futures on the S&P 500 Index added 0.1 per cent on Thursday. The US equity benchmark slipped 0.7 per cent on Wednesday as energy companies dropped and a slide in Apple Inc. weighed on technology shares. Crude oil in New York fell 3.4 per cent on Wednesday, poised for its biggest two-year drop on record.

BLOOMBERG