Hong Kong: A surprise rate hike from the Reserve Bank of India (RBI) triggered fears that other central banks in Asia may step up inflation-fighting efforts, leading shares lower across the region on Monday.
Analysts had widely expected the RBI to raise rates soon, but the timing of Friday’s 25 basis-points (bps) 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,” said 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 in recent months -- limiting the amount of money they can lend.
Hong Kong fell 2.05%, or 437.57 points, to 20,933.25 as rate-sensitive property developers slumped.
Shanghai edged up 0.22%, or 6.83 points, to 3,074.58, buoyed by airline stocks but doubts over the government’s latest efforts to rein in property prices limited gains, dealers said.
China on Thursday ordered 78 state-owned companies, whose core businesses were not related to the property market, to stop investing in real estate amid concerns a damaging bubble is forming in the sector.
Markets in Japan were closed for a public holiday.
Sydney dropped 42 points, or 0.87%, to 4,830.2.
As a court case began in Shanghai at which four Rio Tinto employees are on trial for bribery and trade-secrets charges, shares in the Anglo-Australian miner dropped 1.52% to $75.03. Rival BHP was off 1.41%.
Shares in Arrow Energy, the coal seam gas developer which announced it has agreed to sell its Australian operations to Royal Dutch Shell and PetroChina for $3.15 billion, dropped 3.59% to $5.10 (4.66 US).
The region reacted negatively to the RBI’s decision to increase 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 20 April 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% in February, well above the central bank’s own estimate of 8.5% by the end of the current financial year this month.
Gold closed sharply lower on interest rate concerns at $1,107.00-1,108.00 an ounce, down from its previous close of $1,124.00-1,125.00.
“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.
Indian shares fell 0.95%, or 167.66 points, to 17,410.57, led by rate-sensitive property, auto and banking stocks
Property firm DLF fell 3.61% or Rs11.3 to Rs301.4 while Tata Motors fell 3.02% or Rs23.7 to Rs760.
The euro remained weighed by concerns over Greece’s fiscal problems in quiet trade, fetching $1.3507 from $1.3535 in late New York trade Friday and 122.45 yen from 122.50 yen. The dollar was at 90.66 yen from 90.54 yen.
However, the greenback took a small hit from the approval of an ambitious health-care bill by the US Congress before regaining ground, said dealers.
The euro bounced from levels close to the intraday low against the greenback after the US House passed a far-reaching, $940 billion bill that will subject US industries to a redrawn and newly-regulated marketplace, and may worsen the country’s fiscal picture in coming years, dealers said.
Oil was lower. New York’s main contract, light sweet crude for April delivery fell 49 cents to $80.19 and Brent North Sea crude for May delivery dropped 39 cents to $79.49.
In other Asian markets:
• Singapore closed 0.91%, or 26.52 points, lower at 2,889.18.
DBS Group rose 24 cents to 14.36 Singapore dollars ($10.26) while motor vehicle firm Jardine Cycle and Carriage fell 38 cents to 26.88.
• Seoul closed down 0.80%, or 13.44 points, to 1,672.67.
• Taipei closed down 61.93 points, or 0.78%, at 7,835.98.
Taiwan Semiconductor Manufacturing Co fell 1.67% to 59.00 Taiwan dollars ($1.85 US) and United Microelectronics Corp lost 1.18% to 16.75.
• Kuala Lumpur fell 0.23%, or 2.95 points, to close at 1,293.65.
Leading bank CIMB was down 0.60% to 13.36 ringgit, while glove-maker Supermax was up 3.40% to 6.12 and top mobile operator Maxis added 1.30% to 5.37.
• Jakarta lost 40.57 points, or 1.48%, to 2,702.40.
Gold and nickel miner Antam fell 3.4% to 2,125 rupiah, coal miner Bumi Resources lost 9.7% to 2,325 and Telkom slid 2.4% to 8,050.
• Bangkok edged down 0.30%, or 2.34 points, to close at 772.25, amid continuing anti-government protests.
Banpu fell 10.00 baht to 610.00, but Siam Cement rose 4.00 baht to 224.00.
• Manila closed down 0.43%, or 13.34 points, to 3,083.89.
Top-traded Aboitiz Power Corp. bucked the trend to rise by 4.08 percent to 12.75 pesos but index heavyweight Philippine Long Distance Telephone Co. (PLDT) fell 0.19% to 2,545 pesos.
• Wellington closed little changed, rising 2.90 points, or 0.09%, to 3,233.30.