Asian stocks fluctuated this week on ever-present concerns that China’s measures to slow inflation will dampen demand.
“Investors are weighing up their options in a rapidly changing global macroeconomic environment,” said Tim Schroeders, who helps manage about US$1 billion at Pengana Capital Ltd in Melbourne. “We may well be headed for another period of consolidation as investors move to lock-in gains against a backdrop of rising uncertainty in the near term.”
The MSCI Asia-Pacific Index declined 0.3 percent to 131.72 this week, following a 2 percent drop last week. Concern over how China will tackle the fastest inflation in two years triggered a global stock rout that wiped more than US$1.7 trillion off global equities since the start of last week.
Australia’s S&P/ASX 200 Index fell 1.4 percent. Hong Kong’s Hang Seng Index sank 2.6 percent. The Shanghai Composite Index tumbled 3.2 percent, the most among the region’s major benchmark indices, on speculation measures to curb inflation including price controls and higher interest rates may hurt earnings.
Japan’s Nikkei 225 Stock Average advanced 3.1 percent as the yen dropped to a six-week low against the US dollar, boosting the value of the nation’s overseas sales when converted into the local currency.
China may impose temporary price controls to counter the fastest inflation in two years, the government said on Wednesday. Price caps on “important daily necessities” and production materials will be used if necessary, the Chinese State Council said on its Web site.
The People’s Bank of China may raise borrowing costs as efforts to cool inflation with subsidies, sales of food reserves and price controls are likely to prove insufficient, said analysts surveyed by Bloomberg News.
Concern that rising consumer prices, which surged the most in two years last month, will undermine the economy spurred Chinese Premier Wen Jiabao (溫家寶) to hold a Cabinet meeting on the issue this week.
The MSCI Asia Pacific Index gained on the last two days of the week, countering a loss of 1.7 percent earlier, after reports showed the US economic recovery is accelerating and on speculation a bailout for Ireland will prevent a spread of the nation’s banking crisis.
The MSCI Asia Pacific Index has increased about 9.6 percent this year, compared with gains of 7.3 percent by the S&P 500 and 6.5 percent by the STOXX Europe 600 Index. Stocks in the Asian benchmark are valued at an average of about 14.6 times estimated earnings, compared with 14.1 times for the S&P 500 and 12.2 times for the STOXX 600.
Meanwhile, Taiwan’s export orders increased at the slowest pace in 12 months as rising currencies and slowing global growth threatened demand for Asian goods.
Orders, an indication of shipments in the next one to three months, rose 12.26 percent to US$35.65 billion last month from a year earlier, the Ministry of Economic Affairs said in Taipei on Friday. That’s the smallest gain since October last year, according to Bloomberg data.
The trade gains that fuelled a faster-than-estimated 9.8 percent expansion in Taiwan’s economy last quarter may falter as a strengthening currency clouds the outlook for exports by companies including Hsinchu-based Taiwan Semiconductor Manufacturing Co (台積電). Still, that may not prevent the central bank from adding to its two interest-rate increases this year to ward off a property bubble.
“Inflation will affect most countries in Asia, including Taiwan, and therefore the central bank will need to take preemptive measures,” Capital Securities Corp (群益證券) economist Hsu Kuo-an (徐國安) said before the report.
The export-order figures were released after the close of trading. The TAIEX dropped 0.12 percent this week to 8,306.12.
“The losses in the Shanghai and Hong Kong markets triggered profit taking in the local bourse,” Concord Securities (康和證券) analyst Allen Lin said. “Rumors circulated in the market that China will raise interest rates soon.”
In other markets on Friday:
Manila rose 2.01 percent, or 82.98 points, from Thursday to 4,203.60.
Wellington fell 0.38 percent, or 12.31 points, from Thursday to 3,268.15.
Mumbai fell 1.73 percent, or 345.20 points, from Thursday to 19,585.44.
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