Asian stocks fell for the first week in two months after China, the world’s fastest-growing major economy, unexpectedly raised interest rates and said it grew at the slowest pace in a year.
The MSCI Asia-Pacific Index slid 0.86 percent this week to 129.90, halting the gauge’s seven straight weekly gains.
“After such a run-up in risk assets, the market was vulnerable to a correction,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd, which manages US$85 billion. “A lot of the potential good news has been factored in and investors may be thinking it’s not a bad time to take profits.”
Japan’s Nikkei 225 Stock Average dropped 0.8 percent this week. Hong Kong’s Hang Seng Index declined 1 percent, South Korea’s KOSPI slipped 0.3 percent. China’s Shanghai Composite Index was little changed.
China raised borrowing costs on Tuesday for the first time since 2007 as policy makers try to curb lending, and prevent asset-price bubbles in a country that surpassed Japan in the second quarter as the world’s No. 2 economy.
Shares of Chinese property developers led the drop among Asian equities on concern higher borrowing costs will deter demand for real estate. China’s central bank raised one-year lending and deposit rates by 25 basis points on Tuesday.
“The perceived problem with China raising rates is it limits economic growth from one of the higher growth economies,” said Tim Schroeders, who helps manage about US$1 billion at Pengana Capital Ltd in Melbourne. “Markets in Asia have adopted a very cautious approach to today’s trading in light of this news.”
China’s economy grew 9.6 percent in the third quarter, the smallest gain in a year, as inflation accelerated last month to the fastest pace in 23 months. The increase in GDP from a year earlier topped economists’ median 9.5 percent estimate. Consumer prices rose 3.6 percent last month, the Chinese statistics bureau said on Thursday.
The MSCI Asia-Pacific Index has risen about 20 percent from this year’s low on May 25 and has gained about 8 percent year-to-date on speculation profit growth will weather Europe’s debt crisis, China’s steps to curb property-price gains and concern about the pace of the US economic recovery. Shares in the gauge are valued at an average of about 14.3 times estimated earnings, near their highest level since July.
Energy companies declined the most this week among the MSCI Asia-Pacific Index’s 10 industry groups.
Taiwan’s TAIEX rose 36.83, or 0.45 percent, on Friday to 8,168.06 at the 1:30pm Taipei close, the third day of gains. The benchmark fell 0.5 percent this week, the second week of declines.
The weighted index moved in a narrow range as buying rotated to select the stocks of large-cap, old-economy firms on renewed optimism toward their closer business ties with China, dealers said.
“Ahead of the strong technical resistance at around 8,200 points, the market remained in consolidation mode despite the gains,” TLG Asset Management (台壽保投信) analyst Arch Shih (施博元) said.
In other markets on Friday:
Jakarta rose 0.27 percent, or 9.73 points, from Thursday to 3,597.74.
Manila rose 0.89 percent, or 37.70 points, from Thursday to 4,286.87.
Wellington picked up 0.76 percent, or 24.83 points, from Thursday to 3,289.75.
Mumbai closed 0.47 percent, or 94.72 points, lower from Thursday at 20,165.86.
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