Market slide slows as Asian stocks rebound
Posted: 23 January 2008 1816 hrs
HONG KONG : The slide in world markets appeared to slow Wednesday as Asian markets rebounded after Tuesday's surprise US rate cut, but traders and analysts warned the fix could turn out to be only temporary.
The US Federal Reserve's 75 basis point cut spurred markets to bounce back from a two-day rout , with many bourses in Asia recouping some of those losses in what has largely been a disastrous year so far.
Hong Kong soared as much as eight percent while Australia had a positive close for the first time in more than two weeks, finishing the day ahead 4.4 percent.
The gains came on the heels of the first unscheduled interest rate cut by the Fed since just after the September 11, 2001 attacks on the United States, as the US central bank moved to stop a global rout on the markets.
But there were immediate signs that the cut, the Fed's largest since 1984, might not be enough to restore investor confidence, which has been badly shaken by worries about the longer-term health of the US economy.
Many bourses in the region trimmed gains as the day went on.
Tokyo and Seoul both pared back solid early jumps, finishing up two percent and 1.2 percent, respectively, while Taipei was down 2.3 percent. Shanghai was up 3.1 percent.
"Buyers are coming back into the market looking for opportunities, though we shouldn't get too carried away as volatility is with us to stay," said Michael Heffernan, a private client advisor at Austock in Sydney.
In its online edition, the Economist magazine said the huge and unexpected cut by Federal Reserve chief Ben Bernanke had a "whiff of panic" about it and that market sentiment appeared to be shifting for the worse.
"The size of the cut also brings more fear than comfort," it said, noting that previous Fed chief Alan Greenspan had never cut rates by more than 50 basis points in one go.
Even with the cut, the Dow Jones Industrial Average shed more than one percent on Tuesday and slid below the 12,000-point level for the first time since November 2006.
Elsewhere in Asia, Singapore was up as much as four percent before going flat later in the day. Manila closed up to 2.7 percent while India opened 4.6 percent higher.
"We did see the market come back quite strongly (in Asia). The question is whether it will be sustained or not," said Song Seng Wun, an economist with CIMB-GK brokerage in Singapore.
Astro del Castillo, managing director of First Grade Holdings in Manila, warned that the "nightmare" turmoil of late could continue, and that worries about the United States still looked to be paramount.
"Investors are not sold on the idea that the Fed move could prevent the US economy from sliding into recession, if it hasn't already," he said. "The uncertainty remains."
US President George W. Bush has proposed around 140 billion dollars in tax cuts to help revive the stuttering US economy, but that appears to have done little to calm jittery investors.
Sub-prime credit woes and a housing slump have added to concerns that the US economy will shrink in the months ahead, slashing demand for products from overseas -- and potentially dragging down economies around the world.