Asian markets adopt a wait-and-see attitude to US debt crisis

by **hlk** Sun 31 Jul 2011, 18:39

PETALING JAYA: Market sentiment in Asia continued to slide yesterday due to the political impasse among lawmakers in the United States over the nation's debt crisis, and investors' wariness concerning debt problems in the eurozone.

The cautious sentiment is expected to continue in the wake of uncertainties over the Aug 2 deadline that has been set by the US Treasury to raise the nation's US$14.3 trillion borrowing limit or risk a default by the world's largest economy.

The 30-stock FTSE Bursa Malaysia Kuala Lumpur Composite Index (FBM KLCI) managed to claw back some of its morning losses to finish three points, or 0.20% lower to 1,548.81.

At the close, Tokyo's Nikkei 225 was down 0.69% to 9,833.03 while Hong Kong's Hang Seng Index dipped 0.58% to 22,440.25 and Shanghai's A share index was 0.26% lower at 2,701.73.

Singapore's Straits Times Index was 0.02% lower at 3,189.26.

ECM Libra Investment research head Bernard Ching said the cautious sentiment in Asian stock markets should continue until Aug 2 as investors adopted a wait-and-see approach.

“This is expected. Should the unthinkable happen, there will be repercussions,” he said.

OSK Research head Chris Eng concurred, adding he was optimistic that the Aug 2 deadline would probably pass with a resolution.

“Policymakers in the United States have to resolve the debt impasse. They would be silly to allow the unthinkable to happen. If it is not resolved, the downside will be painful,” he said.

However, a dealer noted that the Aug 2 deadline had lost much of its impact in the past two weeks.

“The downside is limited now as the markets had some time to digest the situation. If the situation is resolved on Aug 2, there could be one more push upwards as Asian markets look at corporate earnings from the second quarter of this year,” he said.

The dealer also noted that there had been a lot of trading interest in lower liners on Bursa Malaysia in the past two weeks.

“Market action has been choppy but we observed a lot of short-term trading play in the lower liners as investors look to make quick gains,” he said.