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Choppy Asia Session Reflects Frayed Investor Nerves

CNBC.com
Thursday, 9 Oct 2008 | 5:20 AM ET

Investor nerves were frayed and that was reflected in Thursday's chopping trading session with markets weaving in and out of negative territory even after central banks around the world cut interest rates to support the global economy.

In an unprecedented display of international coordination, the Federal Reserve, the European Central Bank along with several others including China's central bank on Wednesday executed an emergency rate cut, hours after equity markets plunged in Asia and Japan's Nikkei chalked up its biggest decline since the 1987 crash.

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The yen slipped after soaring higher overnight, with dealers unraveling some safety trades. However, many analysts say the yen will likely remain firm as long as the crisis persists because of the appeal of Japan's current account surplus and its stable financial sector. The dollar rose 1.1 percent against the yen to 100.24 yen, rebounding from a six-month low of 98.60 yen hit on Wednesday. The euro also recovered against the yen, up 0.9 percent at 136.60 yen, after falling to a three-year low of 134.15 yen on Wednesday.

Japan's Nikkei 225 Average ended down half a percent for its lowest close in more than 5 years after a day of volatile trade, torn between hopes of new
policy steps to contain the financial crisis and worry about the global economy. The Nikkei surged over 2 percent in the afternoon on a New York Times report that the U.S. Treasury Department is considering taking stakes in many U.S. banksto address concerns that banks have about lending to one another and to other customers.

Seoul shares ended slightly higher, but lost much of their earlier 3 percent gains on a Bank of Korea interest rate cut as volatility in forex markets and economy worries kept investors wary. But banks were helped by the interest rate cut, sending Shinhan Financial Group nearly 4 percent higher.

Australian shares fell 1.5 percent, as top miner BHP Billiton trimmed losses and investors took a breather after a coordinated rate cut by central banks to stem panic selling worldwide. Money flocked to gold stocks such as Newcrest Mining and health care companies as safe havens and it also went into companies that were set to benefit from the Australian dollar's slide to near five-year lows, like beleaguered paper maker PaperlinX.

Hong Kong shares rallied 3.3 percent, as stocks rebounded from a two-day, 13-percent slide, supported by a coordinated worldwide interest rate easing and a raft of market support measures from Beijing. Chinese property stocks took off after an 27 basis points interest rate cut. China Overseas Land Investment and Guangzhou R&F Properties both advanced. Asia's largest refiner, Sinopec,rose amid an extended oil price pullback, while PetroChina, which also has refining operations, climbed.

Singapore's Straits TimesIndex was up 3.4 percent led by gains in banking and resource stocks, as investors took heart from a series of rate cuts by central banks around the world. Top lender DBS Group, OCBC Bank and Palm oil producer Wilmar International were all on the advance. Oil rig maker Keppel Corp was also higher.

Chinese stocks were back in negative territory as concerns over the global financial crisis weighed heavily on the Shanghai Composite Index, which closed 0.8 percent lower. The central bank said it was cutting benchmark one-year bank lending and deposit rates by 27 basis points, and reducing the ratio of deposits that all banks must hold in reserve by half a percentage point, in its most aggressive easing this decade.