Singapore / Hong Kong: Asian stocks eased on doubts about the pace of economic recovery, while the Indonesian rupiah and the Indian rupee fell on concerns over official steps to curb capital flows after Brazil’s latest move to limit the rise of its currency.
Gold edged lower, taking a breather from the previous session’s jump to new peaks above $1,150 (Rs53,360) per ounce, as the dollar gained some ground against the euro and other major currencies.
After gains of nearly 70% in Asian equities so far this year, investors are likely prone to taking profits before year-end.
A six-month low in US housing construction in October and news this week that Mitsubishi UFJ Financial Group Inc., Japan’s largest bank, will have to raise $11 billion in new shares to meet stricter capital requirements have underscored how the climb back from the worst economic crisis in generations will be slow.
“With the capital raisings, the yen’s strength and politics, there is three times the pain,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management,
The Nikkei share average fell 1.3% to the lowest since 21 July, also on concerns over the government’s fiscal policies.
The MSCI index of Asia Pacific stocks outside Japan fell about 0.6% but still hovered near a 15-month high reached on Tuesday.
Korean shares outperformed the region with a 1% jump as heavy foreign and programme buying sent technology, banking and auto issues higher, with investors increasingly believing a rebound was due after the Kospi’s recent underperformance.
Shares in Shanghai, Sydney and Singapore also rose, but Hong Kong, Taipei and Mumbai fell.
The dollar rebounded against the euro, and the yen gained against high-yield currencies as investors, spooked by weaker equities performance and fears of capital controls in emerging markets, unwound positions in riskier assets.
The high-yielding Australian and New Zealand dollars fell sharply as traders took profit from riskier carry trades, with the kiwi dollar losing 2% against the yen.
The Australian dollar fell 1% to $0.9186, with the currency remaining under pressure after expectations for a December rate hike recently cooled.
Market fears over possible capital curbs by Indonesia have eased after the central bank played down the threat of immediate curbs, but investors sentiment was hurt by Brazil’s move to curb capital inflows, traders said.
Brazil took another step on Wednesday to try to contain the appreciation of its currency, unveiling a 1.5% tax on certain trades involving American Depositary Receipts issued by Brazilian companies.
The Indonesian rupiah fell a percent to around 9,500 per dollar, prompting the central bank to intervene to support the unit, which remained the best performing currency in Asia this year.
Taiwan has banned foreigners from investing in time deposits and South Korea announced measures on Thursday aimed to tightening controls over currency liquidity to make the banking system less vulnerable to the capital flight.