By Daniel Inman
Shares in Bombay led Asian markets lower on Friday after the
Reserve Bank of India's surprise rate hike, while profit-taking hit
stocks particularly sensitive to economic swings as well as most
emerging-market currencies a day after strong gains.
Investor sentiment turned cautious in late Asian trade after the
Reserve Bank of India raised its key lending rate by a quarter
percentage point to 7.5% in a bid to curb inflation. None of the
dozen economists polled by The Wall Street Journal had predicted
the change in the key policy rate.
India's stock benchmark S&P/BSE Sensex fell 2.1%, while the
U.S. dollar rose to 62.47 rupees, from 61.88 rupees before the
announcement.
Friday was also a day of profit-taking in Asia after the U.S.
Federal Reserve's decision to stick with its stimulus measures
boosted regional markets in the previous session.
"Today looks like being one of those Fridays where markets take
stock after a big news week," said Ric Spooner, chief market
analyst at CMC Markets. "We may see some profit-taking by short
term sellers disappointed that yesterday's strong upward momentum
was not followed through," Mr. Spooner added.
Australia's S&P/ASX 200 fell 0.4%, Indonesia's JSX fell 1%
and Thailand's SET dropped 0.5%.
Japan's Nikkei fell 0.2% as the U.S. dollar weakened slightly in
Asia after it strengthened against the yen (USDJPY) Thursday. The
greenback was at Yen99.25 Friday, after a 1.6% gain in the previous
session.
In Sydney, resources plays and financials pulled back after
their recent strong gains. BHP Billiton (BHP) lost 0.8%, Rio Tinto
(RIO) fell 1.1% and Westpac (WBK) was down 0.7%.
In Tokyo, real-estate firm Mitsubishi Estate Co. (MITEF) rose 1%
after the average land price in greater Tokyo, Osaka and Nagoya
rose 0.1% on year as of July 1 , the first on-year rise in five
years.
Also in Tokyo, retailer Aeon Co. (AONNF) dropped 0.5% after a
Nikkei report said that the company's consolidated operating profit
for the six months ended August 31 will likely fall short of market
consensus.
Still, Southeast Asian markets looked set to post healthy
returns for a week that was dominated by developments suggesting
that U.S. monetary policy could remain easier than previously
expected.
On Monday, stocks rose after Lawrence Summers withdrew from the
race to become the next chairman of the Federal Reserve - a
candidate expected to roll back the central bank's stimulus soon
after taking the post.
Markets on Thursday received another boost from the Fed's
surprise decision to keep its monetary policy steady, going against
widespread expectations for the bank to start reducing its
bond-buying program.
As a result Southeast Asian markets that had been beaten down
over the summer made substantial gains. The fear of a removal of
U.S. stimulus efforts, which had supported these small markets in
recent years, prompted investors to pull their money out of
countries like Indonesia and the Philippines.
The gains this week helped the recovery of these markets:
Philippines' PSE Composite was 6.5% higher since last Friday and
Thailand's SET jumped 5.7% over the same period.
Much of North Asia was closed for public holidays Friday, with
mainland China, Hong Kong and South Korea shut. Markets in Shanghai
and Seoul were closed on Thursday as well, which means that they
haven't had a chance to react to the Fed's latest policy
decision.
When these markets reopen Monday, there will also be a data
point on the Chinese economy in the form of preliminary
manufacturing data for September, a number that has impacted
markets in recent months.
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