HONG KONG, June 14:Asian stocks steadied after another sharp sell-off with investors braced for the release of all important US inflation data later on Wednesday and the prospect of higher interest rates to follow.
The data is seen as key to the short term fate of equities, which have undergone a brutal rout since mid-May when the US Federal Reserve indicated the current cycle of rate hikes may not have reached its eagerly awaited end.
Nikko Cordial Securities equity chief Hiroichi Nishi said investors in Tokyo, where the benchmark rose 0.64 per cent, were generally reluctant to make aggressive bets ahead of the release of May consumer price data in the US.
Uncertainty over future US monetary policy, worries over prospects for the US economy and a lack of inflows from foreign funds are still weighing on investors' minds and this capped further gains, Nishi said.
The general tone of Asian trade was not helped by a 0.80 per cent slide on Wall Street after commodity prices, particularly base metals, fell and the release of wholesale prices data indicated inflation is on the rise.
If the inflation bogey is confirmed by the US Consumer Price Index (CPI), then the Fed is expected to raise interest rates by at least 25 percentage points when it meets on June 28-29.
Further interest rate hikes against a backdrop of slowing economic growth would spell a bleak future for the world's stock markets, at least for the near term, with bonds and bank deposits offering attractive alternatives.
It was a point not lost on International Monetary Fund chief Rodrigo de Rato who said the whipping taken by the markets was a result of investors reviewing a previously benign attitude towards risk.
We see that the markets have recently taken a new appraisal of risk and we believe that was probably a correction that was due, de Rato told reporters in Canberra.
Now we are moving towards a more neutral stance in monetary policy which is healthy because it is more sustainable but of course, that means that interest rates are going up from what we have seen in recent times, so the markets are facing that change.
In Sydney, which rose 0.25 per cent, Aequs Securities head of institutional trading Ric Klusman said speculation that US inflation data will be more benign than first thought prompted investors to return to the market.
Singapore, Jakarta, Manila, Kuala Lumpur and Wellington were also lower.
The market seemed to hit bottom after falling below 1,200 points in early trade and that will help absorb any possible impact from price data due out in the US and continued selloffs by foreign investors in the local market, said NH Investment Securities analyst So Jang-Ho.-—AFP
