Asian Markets Fall on Profit Concerns
World Markets Roundup
Asian markets plunged on Thursday on growing fears of a regional slowdown after South Korea unexpectedly cut interest rates and Japan’s central bank failed to make any major policy changes to boost growth.
The news spooked investors, who were already nervous a day before China releases key data expected to confirm slowing growth in the world’s second-largest economy.
Tokyo fell 1.48 percent, or 130.99 points, to end at 8,720.01, while Seoul closed down 2.24 percent, or 41 points, at 1,785.39.
Hong Kong stocks closed 2.03 percent, or 394.76 points, lower at 19,025.11, amid concern over the Chinese economy.
But Shanghai ended up 0.46 percent, or 10.11 points, at 2,185.49, on hopes of government action to stabilize growth.
Sydney fell 0.70 percent, or 28.5 points, to end at 4,068.0 after weak June jobs figures.
By cutting its key interest rate 25 basis points to 3 percent, South Korea’s central bank joined an international drive to ease the impact of the euro zone debt crisis that threatens export-dependent Asian economies.
The bank said in a statement that the domestic economy was under pressure “due mostly to the increase in euro area risks and the sluggish economies of its major trading partners”.
The Bank of Korea’s reduction was the first since February 2009, when the key rate hit a record low of 2 percent.
The European Central Bank and China’s central bank cut their rates last week, while Brazil on Wednesday slashed its rate to a record low.
But the Bank of Japan took no major steps despite lowering its growth forecast for the fiscal year to 2.2 percent from 2.3 percent, surprising some analysts.
Following a two-day policy meeting, the bank said it would keep rates steady at zero to 0.1 percent, and fine-tuned a 70 trillion yen ($883 billion) asset-purchase program but kept the size of the policy tool steady.
The bank said it would reduce the amount of fixed-rate loans it offers by 5 trillion yen and increase the purchase of treasury discount bills by the same amount. Analysts, however, said the move was not expected to have much effect.
Although expectations of major action by the bank had been waning, analysts were disappointed given the recent moves by other central banks.
“After rate cuts by Korea and Brazil, it’s just odd that the BoJ is not playing ball like everyone else,” said Hideyuki Ishiguro, strategist at Okasan Securities in Tokyo. “Stock investors feel that the BoJ is too tentative, too little and too late on policy, and that it lacks a sense of duty to support the market.”
Asian stocks showed some slipping in early trading on Thursday, following a lead in the US after the minutes of the Federal Reserve’s June meeting showed the rate-setting committee split on whether to provide more stimulus.