Rate Move Hits Asian Markets – WSJ

Posted on February 9, 2011 by

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Chinese and Hong Kong stocks led most Asian markets lower, on fears that Beijing, which raised interest rates this week, will make further tightening moves in coming months that could hurt Chinese demand.

In Tokyo, the Nikkei Stock Average snapped a three-session winning streak to finish down 0.2% at 10617.83, despite overnight gains on Wall Street and a 5.2% jump in shares ofToyota Motor after the auto maker raised its earnings forecast Tuesday.

Hong Kong’s Hang Seng index fell 1.4% to 23164.03, its lowest close of the year. The Shanghai Composite index shed 0.9% to 2774.07 after reopening following the Lunar New Year holidays. Taiwan’s Taiex gave up 1.1% to 9006.82, South Korea’s Kospi lost 1.2% to 2045.58, and India’s Sensex fell 1% to 17592.77. Australia’s S&P/ASX 200 bucked the trend, rising 0.3% to 4904.76, a 10-month closing high.

“The rate hike hit market sentiment but is unlikely to spark heavy selling on stocks as such tightening moves have been expected for some time,” said Central China Securities analyst Zhang Gang, referring to the People’s Bank of China’s 0.25-percentage-point rate increase that took one-year lending and deposit rates to 6.06% and 3%, respectively.

In Shanghai, analysts said they expect more rate rises and increases in banks’ reserve requirements in the months ahead, and some pointed to the risk of further increases in food prices because of difficult weather conditions in northeastern China.

Chinese property stocks were among those hurt on concern that more expensive mortgages will dent demand for housing. China Vanke lost 2% in Shenzhen, and Gemdale dropped 3.3% in Shanghai.

In Hong Kong, China Resources Land skidded 3.9%, China Overseas Land & Investment dropped 2.1%, and Shimao Property Holdings retreated 2.6%.

But HSBC Holdings continued its recent strength, finishing 1% higher and bringing gains over a five-session winning streak to 5.8%. Morgan Stanley revised up its net-income estimates for HSBC by 8% for 2012, primarily on lower U.S. impairment losses and a faster pace of recovery in that country. Separately, Credit Suisse said HSBC’s margins would improve in a scenario where interest rates are rising and yield curves are steepening.

In Tokyo, Komatsu fell 1.6% and Hitachi Construction Machinery lost 1.7%. Both are sensitive to Chinese demand. Daikin Industries fell 3.1% after reporting a double-digit fall in its third-quarter profit.

In Taipei, the market was dragged down by the China news and a rise in the New Taiwan dollar, with electronics exporters hit particularly hard after the local currency on Tuesday rose to its highest level against the U.S. dollar since October 1997. United Microelectronics shed 3.4% and Taiwan Semiconductor Manufacturing gave up 2.3%.

In Sydney, Commonwealth Bank of Australia led lenders higher after beating earnings forecasts. CBA rose 2.1%, Australia & New Zealand Banking Group added 2%, and Westpac Bankingadvanced 1.9%. Boral soared 8.9% after its first-half profit rose 36%.

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Posted in: APAC