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Asian Stocks End Weak Quarter on a High Note

29 Jun 2018 4:22 am
By Joanne Chiu 

Asia-Pacific markets were broadly higher Friday, the last trading day of the second quarter--a period that has seen regional stocks tumble on factors including escalating global trade tensions and higher U.S. interest rates. Chinese stocks led the trading day, with a more than 1% gain. Malaysia's similarly beaten-down market bounced up more than 2%. But tech-and trade-heavy indexes in Japan and South Korea were flat after earlier declines.

Friday's Big Theme

Asia-Pacific markets were divided in the second quarter, with the dollar rally, volatility in global oil prices and fears of a trade war resulting in divergent performances.

What's Happening

Australia's S&P/ASX index was the regional index that most bucked the second quarter blues. It logged a more than 7% gain on the back of strong performances by financial, commodity and energy stocks amid higher oil prices.

Investors were also surprised by India. Its benchmark SENSEX index, which tracks 30 large Indian stocks, recorded a more than 6% gain this quarter--even as the rupee tumbled against the dollar.

Japan's Nikkei was up close to 6% quarterly, but was slightly down in dollar terms because of the depreciating yen.

Chinese stocks suffered this quarter as the country's trade dispute with the U.S. escalated. Both the Shanghai Composite and Hong Kong's Hang Seng index entered into a bear market this week, having declined 20% from their recent highs. Shanghai stocks fell more than 10% in the second quarter alone, dropping to levels last seen in 2011.

Market Reaction

Australia has historically been seen as a proxy for the Chinese economic cycle, said Tai Hui, Asia-Pacific chief market strategist at J.P. Morgan Asset Management, given the country's strength in commodities. But this quarter, the China factor didn't have much of an impact.

"The fact that it doesn't belong to the emerging market category has been helpful to keep the Australian market afloat," he said.

Meanwhile, India's relative lack of dependence on exports and its adequate foreign exchange reserves had helped its market "stay resilient" amid the current global economic uncertainty, he said.

Rising trade tensions and concerns about corporate bond defaults are on Chinese investors' radar going into the third quarter, Mr. Hui added.

"Local investors are being very watchful over what the authorities are doing in terms of de-leveraging," he said.

Markets will likely remain volatile in the near term, said Michele Mak, investment director at HSBC Global Asset Management. But the recent stock-market correction has created an opportunity for investors to "pick up some quality names that can ride through the cycle," she said.

"We're actually quite positive on Asian growth, therefore Asian equities, " she added.


Oil futures paused in Asia after gaining overnight: West Texas Intermediate crude, the U.S. benchmark, dropped 0.3% to $73.22 per barrel. S&P 500 futures were up 0.3% in Asia after small gains in New York overnight.

Write to Joanne Chiu at joanne.chiu@wsj.com

(END) Dow Jones Newswires

June 29, 2018 00:22 ET (04:22 GMT)

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