Nikkei battles to regain ground

Uncertainty over the global economic outlook kept Asian stocks under pressure this week, although the region managed a modest bounce on Friday.

Tokyo was dominated by movements in the yen as the currency struck a 15-year high against the dollar and a nine-year peak against the euro.

The Nikkei 225 Average rose 1 per cent on Friday to 8,991.06 as the yen weakened on expectations that the authorities would take action to stem its recent appreciation.

But the benchmark shed 2 per cent over the course of the week, touching a 16-month low in the process and entering bear market territory as it recorded a 20 per cent fall from its April high.

It was the Nikkei’s third successive weekly decline – its worst run since April – leaving it more than 14 per cent down on the start of the year, compared with a 3 per cent fall in the MSCI Asia-Pacific index in 2010.

But John Higgins at Capital Economics said he was sceptical that the underperformance of Japan’s equity market would continue.

“First, Japan’s economy remains in relatively good shape,” he said. “Second, we think the yen is unlikely to get much stronger from here; third, the stock market in Japan looks reasonably valued by historical standards.”

Furthermore, analysts noted that technical indicators were pointing to the Nikkei looking very oversold.

Export-oriented stocks featured heavily this week given the yen’s gyrations. Honda Motor climbed 1.6 per cent on Friday to Y2,811, but recorded a weekly loss of 0.3 per cent. Similarly, TDK added 2.8 per cent to Y4,415 but still finished the week 3.8 per cent lower.

In Hong Kong, the Hang Seng index fell 1.9 per cent over the week to close at its lowest for a month. China Life Insurance suffered an 8 per cent decline over the past two sessions of the week to close at HK$30.70 after its first-half earnings disappointed the market as it took a big hit on its stock market investments.

In Shanghai, the Composite index edged up 0.3 per cent on Friday, but fell 1.2 per cent over the week.

Australia also garnered some headlines following the country’s elections last weekend.

The S&P/ASX 200 fell 1.4 per cent – its third successive weekly decline.

However, any uncertainty on the political front soon gave way to worries over the annual domestic earnings season, which winds up next week.

Intoll Group saw active trade after it recommended an A$3.4bn takeover bid from Canada Pension Plan Investment Board. An earlier offer from the pension manager was slightly enhanced.

Intoll shares climbed 1.4 per cent on Friday to A$1.475, just shy of the proposed A$1.52 offer from CPPIB.