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Sell-off in energy firms drag Asian markets lower

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HONG KONG: Another sell-off in energy firms dragged Asian markets lower on Wednesday, tracking hefty losses on Wall Street as oil prices tanked.


Shanghai was the shining light, ending up 0.5 per cent after MSCI’s decision to include mainland-listed firms in a key index.


Crude prices sank more than two per cent on Tuesday on increasing fears of a global supply glut, as continued production in the US and elsewhere offsets an Opec output cut deal.


The fall also came despite a drop in US inventories.


“Oil prices have officially entered a bear market (and) plummeted two per cent after reports of rising output from Nigeria and Libya — both Opec members exempt from the production cut deal,” said Stephen Innes, Senior Trader at OANDA.


The crude sell-off, which means the commodity has lost a fifth of its value from recent highs, saw energy firms drag Wall Street down, with all three main indexes ending deep in the red.


And while both main contracts stabilised on Wednesday, Asian energy firms followed their US counterparts.


Rio Tinto sank 2.9 per cent and BHP dived close to four per cent in Sydney, while Hong Kong-listed CNOOC was 0.7 per cent off and Inpex fell 1.2 per cent in Tokyo. Broader markets were also well down.


Tokyo’s Nikkei fell 0.5 per cent, Hong Kong gave up 0.5 per cent in the afternoon, Sydney sank 1.6 per cent to its lowest close since early February and Seoul dipped 0.5 per cent.


Singapore tumbled 0.7 per cent, Wellington eased 0.8 per cent and Manila fell 0.6 per cent.


But Shanghai bucked the trend to end up 0.5 per cent after the US-based MSCI finally approved mainland-listed stocks, or A-shares, for inclusion in its emerging markets index.


The agreement, after three previous rejections, means that for the first time foreigners will be able to buy into Chinese markets directly, providing a possible $8 billion of inflows in the near term.


It is also seen as another step in further opening up to the world economy and asserting


Beijing’s growing importance to global finance.


However, analysts tempered expectations and pointed out that while the decision is important, Chinese stocks will only account for 0.7 per cent of the index when they are included next June.


Northeast Securities analyst Shen Zhengyang said: “The thing itself is a good thing. But it has limited benefit for the market.


The money that will come in is just a drop in the bucket, while the market’s liquidity itself isn’t sufficient at the moment due to the deleveraging process in the financial system.”


Carney’s comments disappointed investors after a recent rise in inflation suggested the BoE could lift borrowing costs again.


Adding to the pound’s weakness was ongoing speculation about how tough Brexit terms will be after negotiations on Britain’s departure from the EU got under way.


Sterling is now at levels last seen just before British Prime Minister Theresa May called a snap general election expected to boost her majority, which she eventually lost. In early European trade London was flat, Paris lost 0.5 per cent and Frankfurt dipped 0.2 per cent.— AFP


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