Investors continue to snub stocks in Asia

Focus shifts to credit-tightening steps in China and a windfall tax on mining firms in Australia

Investors continued to snub stocks in Asia as the focus has gradually shifted to the developments in the region and credit-tightening steps in China and a windfall tax on mining firms in Australia undercut the bullish cues from the US stocks. The Greece fiscal crisis seems to have been put on the backburner for the time being as German Chancellor Angela Merkel's cabinet agreed the unpopular 22.4-billion-euro contribution for the troubled Eurozone state. However, the trading was still generally lackluster in Asia with Japan's markets closed for a three-day holiday.

Stocks in Shanghai suffered from fresh moves by China's central bank to rein in bank lending, in a bid to prevent a damaging property bubble. The Shanghai market, which was closed on Monday for a public holiday, fell 1.05 per cent. Investors are concerned that Chinese moves to slow a soaring property market will undermine economic growth. On Monday, China increased the deposit reserve requirement ratio for most banks for the third time this year, the latest in a series of measures aimed at cooling the country's skyrocketing property prices.

The Australian market extended losses for the second successive day, as traders turned apprehensive about Government's proposal to consider a 40% tax on mining companies. Positive closing on Wall Street in the previous session on earnings and merger news failed to enthuse local market, and so was the decision of the Reserve Bank of Australia to increase interest rates by 25 basis points to 4.5%. The benchmark S&P/ASX200 Index plunged 48.40 points, or 1.01% to close at 4,737, while the All-Ordinaries Index ended at 4,753, representing a loss of 53.80 points, or 1.12%. Resources were hurt massively.

The Reserve Bank of Australia decided to hike its key interest rate by 25 basis points. As expected, the central bank raised the cash rate to 4.5%, effective May 5, 2010. The central bank had hiked the rate in March and April by 25 basis points. "The Board expects that, as a result of today's decision, rates for most borrowers will be around average levels. This represents a significant adjustment from the very expansionary settings reached a year ago," Governor Glenn Stevens said in a statement.

Thailand stocks turned higher though. The benchmark stock index surged 4.1 % after Prime Minister Abhisit Vejjajiva proposed a Nov. 14 date for fresh polls if anti-government protesters occupying central Bangkok accept his reconciliation plan and peace and stability is restored.

In Mumbai, the key benchmark indices slumped, extending losses for the second straight day, tracking losses in world stocks. The BSE 30-share Sensex was down 275.05 points or 1.58%, off close to 355 points from the day's high. Banking, capital goods, IT, metal and realty stocks fell. Index heavyweight Reliance Industries (RIL) declined in volatile trade. The market breadth was weak, in complete reversal of a strong breadth earlier in the day. All the sectoral indices on BSE were in the red. As per provisional figures, the BSE 30-share Sensex was down 275.05 points or 1.58% to 17,111.03. The index rose 78.74 points at the day's high of 17,464.82 in early trade. The Sensex lost 284.12 points at the day's low of 17,101.96 in late trade. The S&P CNX Nifty was down 83.70 points or 1.6% to 5,139.05 as per provisional figures

In other markets, Hong Kong's Hang Seng fell 48.31, or 0.2 % while Indonesia gained 0.2 %. South Korea's Kospi, slipped 0.1 % to 1,718.75 while Singapore dropped 1 %. Taiwan stocks pared 0.27% to make it an out rightly bearish session for Asia.

Yesterday, Signs of improving U.S. economic growth helped equities overnight. The Commerce Department said that personal spending rose 0.6 % in March, the biggest increase in five months while the Institute for Supply Management said U.S. manufacturing activity expanded last month at the fastest pace in nearly six years. The Dow Jones industrial average rose 143.22, or 1.3 %, to 11,151.83, its biggest point and %age gain since Feb. 16. The broader Standard & Poor's 500 index rose 15.57, or 1.3 %, to 1,202.26, and the Nasdaq composite index rose 37.55, or 1.5 %, to 2,498.74.

Light sweet crude oil futures for June delivery plummeted under $85 a barrel in electronic trading, extending losses in sync with the frail Asian equities. The euro fell to fresh one year lows after Germany approved its share of a 110-billion-euro rescue for debt-ridden Greece. The euro was at 1.3115 against the US dollar, extending the slide after breaking below 1.3200 levels.