Asia: Share rally runs out of steam as oil falls again

[HONG KONG] Asia's share rally stalled Tuesday, as a boost from Wall Street was overshadowed by renewed weakness in the price of oil.

Japanese stocks were broadly flat while Shanghai and Hong Kong were down in early trade, the day after Chinese markets surged on the announcement of a new securities regulatory chief.

Mace Blicksilver, the US-based director of Marblehead Asset Management, said he was "cautious" about the prospect for further gains.

"I just don't think everything that was a concern two weeks ago has gone away," he said.

US crude for April, a new contract, fell 1.38 per cent while Brent for April was down 1.30 per cent, as traders weighed continuing discussions on an output freeze by key crude producers in an oversupplied global market.

Key worries include doubts about the ability of oil prices to rise further and the likelihood that low interest rates in major economies will pressure bank earnings.

The International Energy Agency warned Monday world oil prices are unlikely to rise from current levels before 2017, and even then their recovery will be slow as massive oil stocks feed into the market.

"Higher oil prices imply the economy is sound which would open the possibility for us to see investor sentiment turn for the better," Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co in Tokyo, said.

Wall Street equities enjoyed healthy gains Monday, closing sharply higher after US oil prices surged more than 6 per cent.

The gains helped spark especially large increases in petroleum and commodity-linked companies and technology shares.

In response, Japanese energy explorer Inpex advanced 3.5 per cent to 854 yen in early morning deals, while JX Holdings was up more than 2 per cent at 455.1 yen.

But Tokyo shares ran out of steam by the break Tuesday, losing early gains that tracked an oil-linked global rally as exporters including Sony and Honda turned lower.

The Nikkei, which rose 1.32 per cent at the open, was up 0.10 per cent by the lunch break, while Hong Kong eased 0.2 per cent.

Chinese stocks edged down 0.65 per cent as investors turned cautious after Shanghai rebounded about 10 per cent from January lows and approached the 3,000 level, said Castor Pang, head of research at Core-Pacific Yamaichi Hong Kong.

"With the 3,000 level being a major psychological barrier, investors are cautious and may try to offload their holdings once the Shanghai gauge breaches above the level," said Mr Pang.

The yuan declined Tuesday after the People's Bank of China lowered its daily reference rate by the most in six weeks, while the yen strengthened against the euro and the dollar.

In Australia, global mining giant BHP Billiton Tuesday posted a first-half net loss of US$5.67 billion and slashed dividends as plunging commodity prices hammered the bottom line with the company warning of a prolonged period of volatility.

The result in the six months to Dec 31, dogged by impairments, compared to a US$4.26 billion profit in the previous corresponding period, with revenue dropping 37 per cent to US$15.71 billion.

BHP's share price, which has plunged over the past 12 months, was 0.4 per cent higher.

The Anglo-Australian miner has been hard hit by falling prices for its two main commodities, iron ore and oil, with the company scrapping a long-held pledge to keep dividends steady or rising.

But the the dramatic fall in the price of oil since 2014 helped Australian carrier Qantas Tuesday post a huge rise in first-half net profit, which soared 234 per cent.

The A$688 million (S$697 million) result also comes on the heels of a ruthless cost-cutting drive that has seen thousands of jobs axed and aircraft deliveries deferred in recent years to stem mounting losses.

AFP