Title : Asian stocks mixed as investors digest Fed rate
cut
By :
Date : 01 Nov 2007 1844 hrs (GMT + 8hrs)
TOKYO : Global stocks saw mixed fortunes Thursday with many
investors remaining cautious about the outlook for the US economy
despite the Federal Reserve's latest interest rate cut, dealers
said.
Stock markets opened higher in Asia after the Fed acted again to
cushion the US economy from a housing slump, a move which sparked a
rally on Wall Street and sent gold prices above 800 dollars an
ounce for the first time since 1980.
Better-than-expected US economic growth figures for the third
quarter also helped to calm market fears about the impact on the
global economy of recent mortgage and credit market turmoil.
Tokyo ended up 0.79 percent, Hong Kong gained 0.45 percent and
Sydney surged 1.1 percent to an all-time.
But many markets in the region failed to sustain an early rally
amid record high oil prices and lingering jitters about the outlook
for the US economy.
Seoul ended down 0.1 percent, coming off a record high hit earlier
in the day, while Taipei fell 1.17 percent and Wellington ended
flat. Singapore was up 0.2 percent in late deals.
"The Fed's monetary easing brought relief to investors, which
helped the market continue with its record-breaking rally at the
opening," said Lim Dong-Min, an analyst at Dongbu Securities in
Seoul.
But with the rate cut already priced in, investors were left to
ponder more bearish factors such as high oil prices and the
strength of the local currency, the won, he said.
Europe's main stock markets were also mixed in opening trade, with
London down 0.07 percent as Frankfurt rose 0.06 percent and Paris
added 0.08 percent.
The Fed cut its benchmark rate by 25 basis points to 4.50 percent
Wednesday as expected, its second cut in less than two months, and
said risks to the financial markets from the credit crisis had
eased.
The Hong Kong Monetary Authority (HKMA) followed the Fed with a
similar rate reduction, taking its base rate down to 6.0
percent.
The Fed's statement that the risks between higher inflation and
weaker growth were balanced, hinting this would be the last rate
cut this year, was taken positively by investors in Hong Kong, said
Peter Lai, director at DBS Vickers.
"While (Fed chairman Ben) Bernanke did not say that the worst is
over for the subprime crisis, at least he signalled that the
government will not let the US economy go into a recession," Lai
said.
In Tokyo, investors took their cue from Wall Street where the Dow
Jones index gained 1.0 percent Wednesday after the Fed move.
News that US gross domestic product (GDP) grew at an annual rate of
3.9 percent in the third quarter, better than the 3.0 percent
growth forecast by economists, provided an additional lift to
sentiment.
The robust growth performance added to speculation that Wednesday's
US rate cut could be the last for this year.
"The Fed has signalled that it has got a neutral bias for the short
term at least, so the chances of a December rate cut seem to be
less than they were," said Malcolm Wood, a Hong Kong-based
strategist for Morgan Stanley.
"But expectations for additional rate cuts were not huge. The US
market reaction would suggest that they are happy that the Fed is
on their side and I think that should be the reaction here in
Asia," he said.
But Shanghai gave up early gains to end down 0.68 percent, snapping
four days of gains amid concerns the nation's social security fund
may reportedly scale back its stock holdings, dealers said.
The dollar saw mixed fortunes in the region, falling to a fresh
23-year low against the Australian currency but edging higher
against the yen as investors chased higher yields.
- AFP /ls
