Asian Markets Weekly Roundup: Yen and China Property Concerns Weigh on Sentiments

Asian stocks posted mixed performance this week as the yen's movement in Japan and global macroeconomic conditions weighed on investor sentiments across the region.

The Japanese benchmark Nikkei average index and South Korea's KOSPI index climbed 1.9 percent each this week. Australia's S&P/ASX 200 eased 0.3 percent.

In China, the Shanghai Composite Index fell 4.9 percent. Hong Kong's Hang Seng retreated 2.8 percent.

Traders started the week on a positive note after the G20 group of ministers who met in Moscow refrained from singling out Japan on the "currency wars" issue. Tokyo's recent efforts targeted at yen's competitive devaluation to boost the country's lagging economy had invited widespread criticism, prompting analysts to speculate on G20's moves.

But the finance ministers did come to a broad consensus that governments should not resort to currency devaluations targeted at a competitive edge. This would limit Japan from providing further verbal guidance on foreign exchange rates.

The Japanese currency, which had showed strengthening signs in the previous week, resumed its downward spiral. This prompted traders to buy into exporter stocks on improved earnings optimism.

The Japanese government is expected to announce its nominee for the next Bank of Japan governor next week, which could prove crucial to its stimulus plan promises. The outgoing central bank chief Masaaki Shirakawa was largely unsupportive of the government's aggressive stimulus measures, much to the ire of the administration.

Concerns over China's overheating real estate sector dominated market sentiments in Shanghai and Hong Kong this week. Property prices in the world's second largest economy have continued to rise at an unprecedented rate, ever since the country recovered from its recent slump.

Data released this week showed that 53 of the 70 government tracked cities reported rising prices in January. The government, on its part, has asked local authorities to enforce property purchase restrictions if they have not already done so and asked them to release property price targets.

But while the soaring costs are a cause of concern, the real problem for the government may be to find a balance between price control and growth. The property sector contributes to about 10 percent of China's Gross Domestic Product (GDP) and has direct influence over about 40 other industries. Growth in the sector is critical to China's expansion efforts, which has seen the worst annual economic performance in years in 2012.

US economic concerns too returned to haunt Asian traders this week. Minutes of the Federal Reserve's policy meeting showed that the committee members held stark differences regarding the current stimulus plan. Although analysts do not expect the central bank to come up with drastic changes for the moment, traders remained cautious on the policy direction in the world's largest economy.

A slew of weak eurozone economic indicators that pointed to stagnating conditions refuelled fears on the 17-nation bloc's recovery efforts. Concerns were underscored after the European Commission, in its winter forecast suggested that the euro area will not achieve growth in the current year, indicating a contraction 0.3 percent.

The Week Ahead

US Federal Reserve Chairman Ben Bernanke is set to give his congressional testimony in the coming week. After the Fed's minutes spooked markets this week, traders will be keeping a close watch to know whether Bernanke is concerned over the current stimulus plan.

Italian political developments will be closely watched over the weekend, as the polls outcome could have a critical impact on the eurozone's fiscal recovery efforts. Although Pier Luigi Bersani is seen as the frontrunner, markets remain wary of an uncertain outcome.

In Japan, the announcement of the next central bank chief will be in focus in the next week. Various economic indicators, including manufacturing purchasing managers index (PMI) and the more-crucial industrial output figures are also expected in the coming days. China's official and HSBC-released manufacturing PMIs will also be published in the coming week.