Indian bourses tumble the most after RBI monetary policy announcement
Headline shares on the Asia Pacific market closed mixed in quiet trading on Friday, 20 September 2013, as investors took breather following strong gains this week and on caution ahead of Sunday's federal elections in Germany.
This has been a very positive week for Asia Pacific market and risk assets in general. Markets received boost firstly with news that the Lawrence Summers' exit the race to head the Federal Reserve, and most importantly with the surprise Fed decision not to taper the bond buying programme gave another boost for risk appetite.
The Fed's shock decision sparked a broad-based rally in global stocks, commodities and riskier currencies as sentiment was buoyed by the prospect of cheap dollars sloshing around in financial markets for some more time. That gave a much-needed fill-up to emerging markets, which had suffering for months from concern that an end of cheap dollars could cause capital outflow.
Investors are watching German Chancellor Angela Merkel's bid for re-election on Sept. 22. While Chancellor Angela Merkel is likely to win her third term, her lead has narrowed in recent opinion polls and a new euroskeptic party, Alternative for Germany, could make headway in the parliament, which could rattle some investors.
Among Asian bourses, Tokyo shares were mixed, with the Nikkei Stock Average falling 0.16% to end the day at 14,742 while the Topix rose 0.29% to 1,218.98.
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Tokyo stocks commence trading with firm footing today, with the Nikkei Stock Average climbing 35 points from prior day closure to begin the day at 14,801, surpassing 14,800 during trading hours for the first time since July 23. But, the market then slipped and was 0.16% down for the day, as investors headed for the sidelines ahead of Sunday's federal election in Germany. Market players also sold shares to square their positions ahead of a three-day weekend in Japan.
Mazda Motor Corp rose 1.4% to 438 yen following a Nikkei newspaper report that the company will start shipping compact vehicles to Europe from its new plant in Mexico as early as next year.
Shares of Honda Motor Co dropped 0.5% to 3880 yen after the auto maker said it's recalling 374,000 vehicles in the U.S. to fix possible problems with airbag units.
In Australia, Australian shares declined, pulling the benchmark S&P/ASX 200 lower by 0.36% from five year high, mirroring similar-sized falls in other Asian markets, as investors squared positions after a week of solid gains and ahead of the German polls. The Australian bourse tacked on 1% for the week and continues to hover near a five-year high of 5300.1 touched Thursday.
Shares of precious-metal miners went lower on profit booking following sharp rally previous day. Perseus Mining was down 1.5% to A$0.67 and Kingsgate Consolidated lost 6% to A$1.795. Materials and resources blue chips were also lower, with BHP Billiton was down 0.8% to A$36.39, Rio Tinto down by 1.1% to A$62.91 and Fortescue Metals Group down by 0.4% to A$4.56.
Shares of defensive telecommunication, utilities and consumer staple stocks were amongst the lone standouts in Sydney. Telstra ended 0.81% higher at A$4.96. David Jones gained by 2.1% to A$2.91 and Myer rose by 1.5% to A$2.78. Supermarket owners Woolworths was up 0.7% to A$35.02 and Wesfarmers, which owns Coles, rose 0.3% to A$41.51.
In India, Indian benchmark indices were trading steep lower in afternoon trade as the Reserve Bank of India, in a surprise decision, raised its key policy rate viz. the repo rate by 25 basis points (bps) to 7.5% from 7.25% after a monetary policy review today, 20 September 2013.
At 14:10 IST, the S&P BSE Sensex was down 517.32 points or 2.51% to 20,129.32, snapping its four-day long rising streak, with metal, banking, consumer durables, IT and FMCG sector stocks succumbing to profit-booking.
The RBI reduced the marginal standing facility (MSF) rate by 75 basis points from 10.25% to 9.5% with immediate effect. It has reduced the minimum daily maintenance of the cash reserve ratio (CRR) from 99% of the requirement to 95% effective from the fortnight beginning September 21, 2013, while keeping the CRR unchanged at 4.0%.
The Indian rupee weakened further against the dollar after the RBI policy. The partially convertible rupee was at Rs 62.42.
Elsewhere, New Zealand's NZX50 lost 0.48%, Indonesia's JKSE Composite declined 1.77% and Singapore's Straits Times Index dropped 0.31%. Malaysia's KLSE Composite rose 0.63%. Financial markets in South Korea, China, Taiwan and Hong Kong are closed on Friday for public holidays. Japanese markets will be closed Monday.
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