Markets: Appetite for Risk Gone; Emerging Boards Hurting

By webadmin on 10:15 pm Feb 11, 2011
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Global bourses were mostly lower on Friday, with South Korea’s benchmark sinking after the country’s central bank signaled more interest rate hikes are in the pipeline, and as anti-government protests in Egypt gathered steam.

Oil prices jumped above $87 a barrel as Egyptian President Hosni Mubarak clung to power amid an escalation in the protests calling for his resignation. The standoff poses a major test for the military as protesters stepped up calls for the army to intervene against Mubarak. The dollar was up against the euro and the yen.

Most European boards were down.

South Korea’s Kospi tumbled 1.6 percent after the country’s central bank left its key interest rate unchanged while also highlighting the problem of rising inflation, suggesting it will raise rates in coming months.

Central banks in Asia have been raising borrowing costs in a bid to stem inflation amid robust economic growth. China’s central bank raised interest rates Tuesday for the second time since late December to rein in rising prices. India and Thailand have also hiked rates recently.

Australia’s S&P/ASX 200 let go of the previous day’s gains, dropping 0.7 percent. Indexes in Singapore, Taiwan and Malaysia were also lower. Singapore and Malaysia posted their biggest weekly losses in almost nine months. Japan’s markets were closed for a public holiday.

Meanwhile, Hong Kong’s Hang Seng rose 0.5 percent but failed to close above 23,000 for the second day in a row.

Tom Kaan of Louis Capital Markets said the index’s recent fall below 23,000 was led by faltering shares in the company that runs the territory’s stock exchange following a flurry of merger discussions between exchanges that did not include Hong Kong’s.

The company said it was aware of recent announcements by other major stock exchanges contemplating mergers and it is “monitoring these developments,” but it is not involved in any such talks.

Mainland Chinese shares ended the week on an upbeat note in active trading as investors settled down after the interest rate hike announced on Tuesday. The benchmark Shanghai Composite Index gained 0.3 percent while the Shenzhen Composite Index of China’s smaller, second exchange rose 1.1 percent.

Market sentiment was otherwise glum as anti-government protests in Egypt picked up steam and Wall Street sagged after a bright week.

“With Egypt looking like it’s blowing up again, investor confidence is really not there,” said Kaan. “I am worried about the US market after an eight-day winning streak, you may see a correction coming in and that could weigh on Asian markets next week.”