Markets

Asian equities fall as China's rates increase

By Sarah Jones (China Daily)
Updated: 2011-02-14 13:18

SYDNEY - Asian stocks fell last week, sending the benchmark MSCI Asia Pacific Index down the most since August, as China raised borrowing costs and anti-government protests intensified in Egypt.

Cnooc Ltd, China's largest offshore energy producer, and property developer China Resources Land Ltd tumbled at least 7.5 percent in Hong Kong. PetroChina Co slumped more than 8 percent after announcing an asset purchase. Australian retailers also fell after Myer Holdings Ltd cut its profit forecast.

The MSCI Asia Pacific Index dropped 2.65 percent to 135.82 in the past five days, led by a sell-off in energy stocks as China took further steps to curb inflation. The benchmark gauge last week rallied 1.4 percent boosted by improving corporate earnings.

"Sentiment in the Asia-Pacific market has not been positive," said Kelvin Tay, Singapore-based chief investment strategist at UBS Wealth Management, on Bloomberg Television. "Investors are pricing in further rate hikes to make sure inflation in Asia does not get out of hand."

The People's Bank of China increased borrowing costs for the third time since mid-October, lifting the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate the same amount to 3 percent.

Elsewhere, the Bank of Korea unexpectedly left interest rates unchanged following last month's increase while Australia's central bank Governor Glenn Stevens signaled no urgency to raise interest rates in the first half.

Holidays

Japan's Nikkei 225 Stock Average increased 0.6 percent in a shortened four-day trading week, while Australia's S&P/ASX 200 Index gained 0.4 percent. China's Shanghai Composite Index increased 1 percent while Hong Kong's Hang Seng Index tumbled 4.5 percent.

Market gains were also limited after Egypt's President Hosni Mubarak earlier last week initially defied calls for his immediate resignation, stoking concern that regional political unrest may spread.

"Everyone was taken a bit by surprise that Mubarak didn't set a timetable for a power handover," James Holt, who helps manage about $40 billion in Sydney at BlackRock Investment Management (Australia) Ltd, said on Friday. "Markets are trying to gauge the risk of political deterioration."

Cnooc dropped 7.5 percent to HK$16.44 ($2.11) in Hong Kong, the biggest weekly decline since June 2009. China Resources Land sank 12 percent to HK$12.52, while Agile Property Holdings Ltd, which builds villas and apartments in China's southern Guangzhou province, lost 7.6 percent to HK$10.90.

Gas assets

PetroChina slumped 7.5 percent to HK$10.32 after the nation's biggest energy producer agreed to buy a 50 percent stake in Encana Corp's Cutbank Ridge gas assets for C$5.4 billion ($5.4 billion).

Related readings:  Equities rise for third straight week in China  Another rate hike to follow in March: ABC  Rate hike 'aims to help tame inflation'  China hikes interest rates to damp inflation

Myer tumbled by a record 14 percent to A$3.22 ($3.24) after Australia's largest department store said net profit after tax in the 2011 financial year will be as much as 5 percent less than a year earlier.

Rival David Jones Ltd dropped 6.1 percent to A$4.44, and Harvey Norman Holdings Ltd lost 4 percent to A$2.92.

National Australia Bank Ltd paced advancing shares, climbing 3.4 percent to A$25.69. The nation's fourth-largest bank posted an 18 percent increase in first-quarter profit and said it's well placed to absorb fallout from government banking reforms and natural disasters.

ASX Ltd, the operator of Australia's main stock exchange, jumped 3.2 percent to A$38.19 after merger announcements by overseas bourses bolstered speculation regulators will approve its takeover by Singapore Exchange Ltd, which fell 1.7 percent.

Deutsche Boerse AG last week said it is in advanced talks to buy NYSE Euronext while London Stock Exchange Group announced plans to acquire Canada's TMX Group Inc.

Toyota Motor Corp climbed 9.1 percent to 3,775 yen in Tokyo after the world's largest automaker boosted its profit forecast. Separately, a US government report found no link between electronics in the company's vehicles and sudden acceleration incidents.

Bloomberg News