Sun, Jul 24, 2005 - Page 10 News List

Asian stocks mixed as markets gauge yuan surprise


Asian stocks closed very mixed on Friday in cautious trade as investors weighed the implications of China's historic decision to revalue the yuan by some 2.1 percent.

They said the move to manage the yuan at 8.1 to the dollar against a basket of currencies, as opposed to fixing it against the greenback at 8.28, held far-reaching ramifications for the economic future of the region as a whole.

On the one hand, Chinese exports will become more expensive but its purchasing power will also increase, boosting demand for key commodities such as coal, iron ore and base metals to power its booming economy.

At the same time, the Asian currencies as a whole will likely appreciate and that could undercut exports, the main growth driver for Asian countries.

These two cross currents helped explain the different reaction on Friday -- record highs in Sydney, Jakarta and India, major gains in Kuala Lumpur, which dropped its own peg, while Taipei and Tokyo, major exporters, fell.

The TAIEX closed 0.21 percent lower on Friday, giving up modest gains on concerns that the yuan revaluation will trigger a rise in Asian currencies generally, threatening the nation's life blood of exports.

Dealers said the bellwether electronics sector was particularly badly hit by worries that exports could become less competitive overseas as a result of the Chinese move.

The TAIEX lost 13.30 points to 6,380.73 on turnover of NT$97.95 billion (US$3.07 billion).

Tokyo share prices closed 0.78 percent lower on concern among automakers and other exporters at the rise in the yen triggered by China's yuan revaluation, dealers said.

However, both analysts and government officials cautioned that the effects of the modest currency adjustment in China, Japan's largest trading partner, would only be felt in the long term.

The NIKKEI-225 index lost 91.68 points to 11,695.05.

Seoul share prices closed 0.04 percent lower after China's yuan revaluation, with investors cautious ahead of next week's corporate earnings results. The KOSPI index closed down 0.43 point at 1,074.22.

Hong Kong share prices closed 1.14 percent higher on hopes of increased fund inflows following China's decision to revalue the yuan and scrap its peg to the US dollar.

Dealers said property stocks led the gains on expectations that increased flows of "hot money" will ease pressure on local banks to raise interest rates further.

The Hang Seng Index closed up 166.32 points at 14,786.46.

Shanghai share prices closed sharply higher, adding 2.47 percent as investors cheered the government's decision to revalue the yuan and reform the country's currency regime. The Shanghai A-share Index rose 26.56 points to 1,100.42, and the Shenzhen A-share Index was up 5.16 points or 2.08 percent at 253.08.

The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 25.69 points or 2.52 percent at 1,046.32.

Sydney share prices closed at a record high for a second day in a row as investors welcomed the revaluation of China's currency which is expected to boost demand for key resource exports.

The SP/ASX 200 ended the day up 27.9 points or 0.64 percent at 4,371.1.

Singapore share prices closed 0.35 percent higher for a fourth consecutive day of gains as the revaluation of the yuan gave a boost to select China related stocks. The Straits Times Index was up 8.20 points at 2,319.34.

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