The Asian shares went down on Wednesday as the prices for oil continued to decline on the third day, forcing the investors to seek the help of safe-haven assets. They also lifted the bonds to higher levels.
The oil market has for a long time from 2015 experienced a low season for the stakeholders. The prices have continued to decline with no signs of improvement. Increase in oil supply as the demand goes down has is the major contributing factor to the sliding oil prices. The main oil producers have not yet decided to reduce the amount of oil on board. There are logistics issues within OPEC, a cartel of giant oil producers in the world. Whenever oil prices are going down, the cartel members usually agree among themselves to cut down oil production. The situation is different this them round. Most of them are unwilling to lower the oil production. They fear that they stand to lose more as the competitors gain.
The oil inventories thus stand high.
Hopes that this week would see the production cut down deemed as the 7 days ended with no deal signing happening. Talks between Venezuela energy Minister and Russia’s oil Minister did not occur leading to lack of a clear plan on the way forward.
The prices have decline by about 70 percent in the eighteen months that have passed so far. Economy of China, a major oil market, has continued to struggle and thus reducing the demand. As all these happen, the supply continues to reach unexpected heights.
A research that was done on China’s service sector indicated that growth started to pick up in January. The figures obtained are however, still lower than what is expected. Investors have therefore, brushed it off.
Caixin China services index went up from December’s value of 50.2 to 52.4 in January. The slight improvement indicates that the government has a policy that is helping growth to occur in some sectors of the economy.
As the bonds dwindle, the precious metals became interesting to the investors. Their major advantage is that they pay no interest. At times such as these when Europe and Japan are getting unwanted interest rates, the assets become a safe-haven.
Most currencies in Asia were pressurized by the U.S. dollar. The AUD which goes through a number of fluctuations was 0.3% off.
The investors are looking forward to get the U.S. economic data in the days to come. The survey on services sector results is anxiously awaited.
Some of the countries are trying their best to handle the situation. Beijing has instigated relaxed borrowing for the home buyers. It has brought onboard cost-friendly mortgages in a variety of Chinese cities. The first time home buyers will pay 20%, which is down from 25%. Families that already own a home whose mortgage is yet to clear; the bank has cut down on their expenses. They will now pay 30%, down from 40%.