Asia Roundup: Relief rally evaporates

by **hlk** Wed 03 Aug 2011, 07:55

HONG KONG: Asian markets tumbled yesterday as news that US lawmakers had voted in favour of a plan to avoid default was overshadowed by fears about the global economy and a possible American credit rating downgrade.

In Tokyo, expectations that officials could soon step into the currency markets were raised when Japan's finance minister said the yen was "strongly overvalued" after the unit approached its record high against the dollar in New York trade a day earlier.

In Tokyo, the benchmark Nikkei-225 index dropped 1.21 per cent, or 120.42 points, to end at 9,844.59.

"Investors are concerned about the yen's rise but what worries them more is whether demand for global cyclical companies' goods will stay intact or not," said Masanaga Kono, chief strategist at Amundi Japan.

In Shanghai, the composite index lost 0.91 per cent, or 24.52 points, to 2,679.26.

"Investors are taking a wait-and-see approach ahead of upcoming major economic indicators for July," Shenyin Wanguo Securities analyst Li Xiaoxuan told Dow Jones Newswires.

Seoul slumped 2.35 per cent, or 51.04 points, to 2,121.27 and Sydney ended 1.43 per cent, or 64.2 points, off at 4,433.6.

The losses came a day after a rally on news that an eleventh-hour deal had been struck between the White House and party leaders to raise the country's debt ceiling and avoid a catastrophic default on US sovereign debt.

However, despite the news - which ended months of bickering - dealers turned their attention to the possibility that the triple-A credit rating the US enjoys could be downgraded for the first time ever.

The imminent end to the US debt saga "lifts an overhang on global markets but we think deteriorating growth outlook is the bigger overhang," ING Financial said in a note to clients, according to Dow Jones Newswires.

In other markets:

* Taipei closed 1.34 per cent, or 116.66 points, lower at 8,584.72.

* Manila closed 0.64 per cent, or 29.30 points, lower at 4,521.23.

* Jakarta fell 0.37 per cent, or 15.60 points, to 4,177.85.

* Bangkok fell 0.40 per cent, or 4.53 points, to 1,139.61.

* Mumbai fell 1.12 per cent, or 204.44 points, to 18,109.99. - AFP