Choppy moves in Asian markets

Thin trading sees reversal of earlier gains as China rate hike effect kicks in

Asian markets witnessed a choppy session today as early gained were given up slight moderation was witnessed in the major markets as the Chinese rate hike finally led to a fall in the country's stocks, pulling the local indices in red and having a trigger effect on the other markets too. The day started off in good spirit as traders digested the Chinese interest rate hike on Christmas Day on optimism about broader global economic recovery.



China raised interest rates for the second time in slightly over two months, suggesting that the world's second-largest economy is gearing into a formal monetary tightening cycle. However, the markets managed to hold on amid thin trades, as sentiments were unaffected given the barrage of strong economic data from the US last week. Commodity prices also stayed strong. US stocks were mostly unchanged in the lightly traded session on Thursday with the Dow adding 14 points or 0.1% to close at 11,573.49. Markets in Australia, New Zealand and Hong Kong were shut today for a holiday, making it a very light trading session.

The Japanese stocks closed with small gains as traders eyed a mostly positive undertone in eh regional markets and sidelined data showing a nearly 7% drop in the automobile production. The Japanese yen eased slightly and the benchmark Nikkei 225 Index added 76.80 points, or 0.75% to close at 10,356. On the economic front, minutes of the last Bank of Japan's policy board meeting revealed that the country is facing more downward risks to its economic growth and price outlook than upside risks. Members continued to be wary of the local currency's appreciation exerting downward pressure on Japan's economy by hurting exports and corporate profit.

Chinese markets edged higher initially as banks and insurers companies soared but pared the gains later on in the day. The Chinese Yuan came under some selling pressure and the benchmark Shanghai Composite Index gave up its early gains to settle at down nearly 2% to end just above 2800 points level. China raised interest rates for the second time in slightly over two months, suggesting that the world's second-largest economy is gearing into a formal monetary tightening cycle. The People's Bank of China said Saturday that it will raise the one-year yuan lending rate by a 25 basis points to 5.81% from 5.56%, and the one-year yuan deposit rate to 2.75% from 2.50%. The move comes after the central bank raised on 19 October the benchmark lending and deposit rates also by one 25 basis points each, the first rate increase in nearly three years. in another economic development, the country also exempted consumption taxes on pure biodiesel made from waste animal fats or vegetable oils, according to the Ministry of Finance (MOF) and the State Administration of Taxation.

In India, the markets retracted from 3-week high on China rate hike and strong Commodity prices. A late bout of selling pressure pulled the index linked counters down from day's highs the intraday gains were reversed in last couple of hours of trade As per provisional figures, the BSE 30-share Sensex was down 54.11 points or 0.27% to close at 20,019.55. The Sensex rose 116.47 points at the day's high of 20,190.13 in mid-morning trade, its highest level since 6 December 2010.

In other markets, South Korea's Seoul Composite dropped 0.37%, Singapore's Straits Times edged up 0.49% while Taiwan's Taiex also gained 0.35%. US dollar eased slightly but remained in ranges amid thin trading. Light sweet crude oil futures for February delivery surged near $92 a barrel in electronic trading and drifted lower. The commodity quotes down 26 cents on the day at $91.25 per barrel.