Asian shares lower on Indian rate move
HONG KONG: A surprise rate hike from the Reserve Bank of India triggered fears that other central banks in Asia may step up inflation-fighting efforts, sending shares lower across the region Monday.
Analysts had widely expected the RBI to raise rates soon, but the timing of Friday’’s 25 basis-point rise for its key lending and borrowing rates, between policy meetings, caught markets off guard.
“India’’s surprise rate hike may renew concerns about the prospect of an earlier-than-expected rate increase by China,” Kim Seung-han at HI Investment Securities in Seoul told Dow Jones Newswires.
Markets have nervously watched China after it took steps to calm inflationary pressures by repeatedly ordering banks to increase their capital reserves since December — limiting the amount of money they can lend.
Hong Kong was down 1.94 percent in morning trade, Singapore slipped 0.52 percent and Seoul was off 1.15 percent. Taipei fell 1.09 percent but Shanghai edged 0.11 percent higher.
Markets in Japan were closed for a public holiday. In Sydney, resource sector weakness dragged shares 0.68 percent lower.
Arrow Energy dropped 19 cents to 5.10 Australian dollars (4.67 US dollars) despite a sweetened joined takeover offer from Shell and PetroChina.
The Reserve Bank of India increased short-term rates from record lows late Friday to battle near double-digit annual inflation amid fast-strengthening industrial output.
Expectations had been for a rate hike at the bank’’s scheduled policy review on April 20 but the RBI said in a statement that inflation had “been a source of growing concern.”
The wholesale price index (WPI) in Asia’’s third-largest economy was 9.89 percent in February, well above the central bank’’s own estimate of 8.5 percent by the end of the current financial year this month.
Gold opened sharply lower on the news at 1,104.00-1,105.00 US dollars an ounce, down from Friday’’s close of 1,124.00-1,125.00 dollars.
“There is more talk of inflation coming through, in other words, interest rates are on the rise,” which could weigh on gold as India is a major consumer of the metal, said Investec head of trading Darren Heathcote.
Markets were also reacting to Friday’’s slump on Wall Street where cautious investors eyed the Indian rate move as a possible precursor to tightening action elsewhere and took profits, sending US shares down 0.35 percent.
The euro remained weighed by concerns over Greece’’s fiscal problems in quiet trade with Japanese markets closed for a holiday.
The single currency fetched 1.3510 dollars, from 1.3535 dollars in late New York trade Friday and stood at 122.27 yen from 122.47. The dollar was at 90.51 yen from 90.50.
Oil was lower. New York’’s main contract, light sweet crude for April delivery fell 49 cents to 80.19 dollars and Brent North Sea crude for May delivery dropped 39 cents to 79.49 dollars.
