Asian Stocks Cap Second Annual Decline Amid Rout in Commodities

Asian stocks posted their first back-to-back annual declines since 2002, underperforming benchmarks in Europe and the U.S. amid decelerating Chinese growth and the rout in commodities.

The MSCI Asia Pacific Index has fallen 4.3 percent this year, compared with a 0.2 percent advance for the Standard & Poor’s 500 Index and a 7 percent increase for the Stoxx Europe 600 Index. The gauge was little changed in light trading on the final day of the year, rising 0.1 percent to 131.94 as of 12:48 p.m. in London, as energy shares followed a decline in crude oil.

“This year has been a very volatile and difficult year as the markets were assaulted by volatility from different asset classes,” Kelvin Tay, regional chief investment officer at UBS’s wealth management business in Singapore, said by e-mail. “The sharp selloff in the commodities market badly affected the Asian currency markets, especially Southeast Asian currencies and equities. China’s economy will have a soft landing in 2016.”

After outperforming global shares in the first six months of the year, with the benchmark regional index touching the highest level since 2008, Asian equities slid in the second half on China’s surprise yuan devaluation and investor concern about the Federal Reserve’s interest-rate outlook. Policy makers raised U.S. rates this month for the first time in almost a decade and signaled gradual tightening in 2016.

Energy and raw-material producers led declines on the MSCI Asia Pacific Index in 2015, dropping at least 15 percent, as sentiment has turned negative after a decade-long bull market that was driven by China’s hunger for crops, metals and fuel. Producers rushed to meet that demand, resulting in expanded supplies that are now causing gluts as the world’s second-largest economy grapples with the weakest growth in a generation.

Downgrade to Junk

Noble Group Ltd. led losses on the regional gauge, dropping almost two-thirds of its value. Asia’s top commodity trader plunged following attacks on its finances by critics including the anonymous Iceberg Research and short-seller Muddy Waters LLC that culminated in Moody’s Investors Service downgrading its credit rating to junk this week. Macau casinos MGM China Holdings Ltd. and Wynn Macau Ltd. tumbled more than 50 percent each as China’s anti-corruption drive dragged gaming revenue in the former Portuguese enclave.

China’s gross domestic product will slow from an estimated 6.9 percent growth rate this year to 6.5 percent next year, according to a Bloomberg survey. The nation’s manufacturing sector probably contracted for a fifth straight month in December, according to the median forecast of analysts in a separate Bloomberg survey. The official purchasing managers index is due to be released by the National Bureau of Statistics on Jan. 1.

The Shanghai Composite Index slipped 0.9 percent on Thursday, finishing with an advance of 9.4 percent for the year. That contrasts with a 19 percent slump for the Hang Seng China Enterprises in Hong Kong. The gauges diverged this year for the first time in a decade after the government intervened to support shares in Shanghai and Shenzhen and foreign investors turned bearish on the nation’s earnings prospects.

Markets in Japan, Indonesia, Korea, Philippines and Thailand were closed for holidays Thursday while those in Australia, New Zealand, Hong Kong and Singapore had shortened trading.

Worst Performers

Australia’s S&P/ASX 200 Index fell 0.5 percent on Thursday. The gauge slipped 2.1 percent this year, with BHP Billiton Ltd., the world’s biggest mining company and the nation’s top oil producer, as the biggest drag.

Singapore and Hong Kong are Asia’s worst performing developed markets in 2015, with the Straits Times Index slumping 14 percent and the Hang Seng Index sinking 7.2 percent. Taiwan’s Taiex index declined 10 percent. New Zealand’s S&P/NZX 50 Index climbed 14 percent.

E-mini futures on the S&P 500 Index were little changed on Thursday. The U.S. equity benchmark slipped on Wednesday as energy companies dropped and a slide in Apple Inc. weighed on technology shares. Crude oil in New York fell 3.4 percent yesterday, poised for its biggest two-year drop on record.

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