Sun, Feb 01, 2004 - Page 10 News List

Toyota, Hyundai pace fall as Asian markets decline

CONTAGIOUS CONCERNS Exporters were concerned that the Fed's announcement it might raise interest rates would curb demand, while airlines worried about bird-flu

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Asian stocks fell this week, with the MSCI Asia-Pacific Index having its biggest drop in 10 weeks.

Exporters such as Toyota Motor Corp and Hyundai Motor Corp slid after the Federal Reserve hinted it may raise interest rates sooner than expected, sparking concern US demand will slow.

The MSCI Asia-Pacific Index, which tracks 855 companies in the region, fell 2.6 percent this week, its steepest decline since the week ended Nov. 21.

The Fed on Jan. 28 unexpectedly dropped its commitment to hold interest rates low "for a considerable period," saying instead that it will be "patient" in keeping down borrowing costs.

"The chance of the Fed raising rates has gone up, and whenever they tighten it's bad for Asian markets," said Hou Wey Fook, who oversees about US$2 billion as chief investment officer at OCBC Asset Management Ltd in Singapore.

Benchmarks in Hong Kong and Thailand slid on concern the spread of the bird flu virus in the region will damp travel demand and curb consumer spending.

The Hang Seng Index had its biggest weekly slide in 10 months, while Thailand's SET Index was the week's biggest percentage decliner in Asia, down 7.4 percent.

The SET also had its first monthly decline in 11 months.

The Federal Open Market Committee voted unanimously to leave the overnight bank-lending rate at 1 percent, the lowest since 1958. The next FOMC meeting is scheduled for March 16.

Only two of the 23 firms that trade securities directly with the central bank had expected it to drop the "considerable period" wording, which had been in each statement since August.

In the US, the Standard & Poor's 500 Index lost 0.9 percent for the week, while the Dow Jones Industrial Average shed 0.8 percent and the NASDAQ Composite Index dropped 2.7 percent.

Yesterday, a government report showed the economy grew at a slower-than-expected pace in the fourth quarter.

The MSCI Asia-Pacific Consumer Discretionary Index, which tracks the performance of exporters including Toyota Motor, Hyundai Motor and Matsushita Electric Industrial Co, fell 3.8 percent for the week, the biggest percentage decliner among the 10 industry groups.

In Japan, companies that rely on US sales paced the Topix index's 2.7 percent decline. The index fell for a fifth consecutive day on Friday, its longest losing streak in nine months. The Nikkei 225 Stock Average slid 2.6 percent for the week.

Toyota, the world's second-largest automaker, dropped 5.7 percent, its worst weekly performance since September. It gets about 80 percent of its operating profit from North America.

Matsushita, the world's largest maker of consumer electronics, fell 4.1 percent. It exports 35 percent of its products.

South Korea's Hyundai Motor, which gets more than half its sales from exports, lost 7.1 percent, its steepest slide since the five days ended Sept. 28.

Japan's UFJ Holdings Inc paced a drop among the nation's banks. UFJ, the country's fourth-largest bank, plunged 14 percent and was the second-biggest loser on the Nikkei. Mizuho Financial Group Inc, Japan's largest bank, shed 3.7 percent.

Regulators will inspect UFJ Bank Ltd, a unit of UFJ, after finding internal documents showing UFJ's borrowers' financial conditions were worse than in official documents shown to the agency, the Nihon Keizai Shimbun said last weekend. UFJ said it wasn't aware of the inspection.

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