Asian mostly settles in red

Thinly traded session sees regional benchmarks close in negative territory
Asian stocks ended mostly in red today amid a thinly traded session as China ordered banks to raise their reserves, the latest in a series of moves aimed at curbing inflation and surging property prices. Markets in Japan and China were closed for a public holiday and traders focused mostly on the regional developments as overheating in China took the centre stage. The International Monetary Fund stated that Asia is showing rapid recovery compared to the rest of the world. But, it warned that the fast rebound is attracting capital inflows that could lead to overheating in the region and eventually to the creation of asset bubbles.
In its latest report on the economic outlook for the Asia Pacific region the Washington-based lender said brighter economic growth prospects and widening interest rate differentials with developed economies are likely to attract more capital into the region. This could lead to overheating in some economies and increase their vulnerability to credit and asset price booms with the risk of subsequent abrupt reversals.
Thus, the IMF urged policymakers to be attentive as to protect the macro economy and financial system against such imbalances in the local asset and housing markets. The fund also called on Asian governments to reduce their reliance on overseas shipments and boost domestic consumption saying that the region's main policy challenge over the medium term will be trying to rebalance growth from external to domestic sources.
The People's Bank of China said Monday that the deposit reserve requirement ratio for most banks will be raised half a percentage point, starting May 10. This is the third time this year that the central bank has raised the deposit reserve minimum.
Global shares on Friday dropped despite European Union and the International Monetary Fund announcing Sunday they agreed on euro110 billion in emergency loans for debt-ridden Greece on the condition Athens make painful budget cuts and tax increases. Markets are still reluctant to consider this as an outright solution for a structural debt problem in Greece and given that the amount of this package has nearly tripled since Greece first formally asked for it, have been keeping a tab on the sentiments.
The Australian market ended the trading session Monday, the first day of trading for May, in a weak note, dragged down by resource stocks on concerns about the government's plant to impose a 40% tax on the resources industry. The proposed tax, called as Resource Super Profits Tax, or RSPT, being under consideration will result in revaluation of the targets for potential mergers and acquisitions in the industry, opine the analysts. Weak cues from Wall Street, hike in China's reserve requirements for banks, and oil slick in the US also weighed on market sentiment. The benchmark S&P/ASX200 Index declined 21.90 points, or 0.46% to close at 4,785, while the All-Ordinaries Index ended at 4,807, representing a loss of 26.80 points, or 0.55%.
A report released by the Australian Bureau of Statistics revealed that house prices in the country surged 20% year-on-year in the March quarter, following a 13.5% increase in the last quarter of 2009. On a quarterly basis, house prices increased 4.8% between January and March, slower than the 5.1% increase in the December quarter, the report noted.
Hong Kong witnessed some heavy pondering as the banks and financials were hammered following the China moves. The Hang seng ended the day 1.41 percent, or 297.23 points, lower at 20,811.36, as China it tries to curb new lending to avoid a damaging property bubble. China Construction Bank dropped 1.56 % and Industrial, Commercial Bank of China also lost 1.56 percent, while among developers China Resources Land dived 5.11 % and China Overseas fell 3.77%.
Trading volume was light in Asia as the two biggest markets, Japan and China, were closed for holidays. Markets in Thailand and the Philippines were also closed.
In Mumbai, high beta infrastructure stocks and Metal stocks dropped on concern monetary tightening in China will crimp demand for the metal. Auto shares survived the broad market decline on robust sales in April 2010. Interest rate sensitive banking and financial shares declined on fears the Reserve Bank of India may resort to further monetary tightening to counter soaring inflation. The BSE 30-share Sensex was down 169.80 points or 0.97% to 17,388.91 as per provisional closing. The index fell 21.85 points at the day's high of 17,536.86 in early trade. The Sensex lost 212.79 points at the day's low of 17,345.92 in late trade. The S&P CNX Nifty was down 52.45 points or 0.99% to 5225.55 as per provisional closing
In other markets, South Korea's benchmark dropped 1.2 %while Taiwan stocks fell 0.65 percent. On Friday, the US markets fell on news of criminal probe on Goldman Sachs and CRR hike in China. Goldman Sachs plunged 9.4%, lowest in more than nine months. The Dow Jones Industrial Average ended down 159 points or 1.4% at 11008 on Friday. The Nasdaq was down 51 points or 2% at 2461 while the S&P 500 Index fell 20 points or 1.7% at 1187.