Asian markets were mixed on Monday as confirmation that Japan has slipped into recession emphasised the gloomy outlook for the world economy.
A weekend meeting of world leaders in Washington to discuss reform of the stricken global financial system provided a symbolic show of unity between rich and emerging nations but produced few concrete measures.
Japan's benchmark Nikkei 225 stock average edged up 60.19 points, or 0.7 per cent, at 8,522.58 after trading as high as 8767.98 and Hong Kong's Hang Seng index gave up early gains to dip 0.1 per cent to 13,529.53.
Mainland China's Shanghai Composite index rose 2.2 per cent, but Australia's main index slid 2.5 per cent and India's Sensex tumbled 4.4 per cent.
"The case for investing in global equities is weak right now," said Andrew Yates, foreign institutional sales vice president at Asia Plus Securities in Bangkok.
"Trading volumes are very low. We don't have the big selling that we had before but then there is no significant buying either," he said. "Valuations are cheap but if you are a fund manager it's better to wait another six months before coming back into the market as valuations will still be low and by then you will have a clearer idea about what is happening in the world economy." Investors seemed to react little to this past weekend's summit where leaders vowed to cooperate more closely and give bigger roles to fast-rising nations, but postponed many decisions until their next gathering in April.
TJ Bond, a Merrill Lynch economist in Hong Kong, said some investors were disappointed there was no explicit announcement of coordinated fiscal stimulus measures.
The Dow Jones industrial average tumbled 3.8 per cent on Friday after another session of volatile trading. US stock index futures were up slightly. Dow futures were up 31 points, or 0.4 per cent, to 8,402, and S&P futures also were up 0.4 per cent to 864.50. Japan's economy, the world's second-largest, entered into a recession for the first time since 2001 as companies sharply cut back on spending in the third quarter, Tokyo said. The economy shrank at an annual pace of 0.4 per cent in the July-September quarter, meaning the country now joins the 15 nation euro-zone as officially in recession, defined as two straight quarters of contraction. The Organization for Economic Cooperation & Development, a club of rich nations, has said it expects the US to slide into recession as well.
But with many companies having already announced significant downgrades to earnings forecasts, the Japanese market took the news of a second straight quarter of economic contraction in its stride. In Tokyo trading, Toyota Motor Corp. dipped 0.3 per cent, Mitsubishi UFJ Financial Group fell 1.7 per cent, while Honda Motor Co. rose 1.7 per cent.
Some analysts believe that much of the bad news has been priced into Asian stock markets, though a quick rebound was unlikely. "With much lower equity prices currently compared to the last 12 months, there would likely be more buyers at these levels should foreign funds rush for the exit again," Song Seng Wun, a Singapore-based analyst with CIMB said in a report Monday. "Hence we believe that the bulk of the damage is already done, although any recovery will still be tentative."