Most Asian markets rebound after US rating talk

KUALA LUMPUR: Most Asian market bellwethers rebounded from negative territory yesterday evening after rating agencies affirmed US credit ratings would not be automatically cut despite US lawmakers’ failure to reach an agreement on spending cuts.

The decision by Standard & Poor’s and Moody’s Investor Service also shored up European stock markets at press time.

The Jakarta Composite Index, which was flat most of yesterday, came to life later part of the afternoon to end the day up 1.51% to 3,735.53, followed by a 1.27% gain at Thailand’s SET Index.

Also ending higher were Bombay’s Sensex 30, which climbed 0.75% to 16,065.42, while Singapore’s Straits Times Index added 0.71% to 2,717.2. South Korea’s Kospi also recovered ground to end 0.34% higher at 1,826.28, while Hong Kong’s Hang Seng Index ended at 18,251.59, up 0.14% for the day.

The Shanghai Composite Index, Japan’s Nikkei 225, Taiwan’s Taiex and Australia’s ASX 200, however, were still between 0.1% and 0.71% in the red.

Back home, the FBM KLCI too pushed into positive grounds about an hour to closing bell to end the day 0.27% higher at 1,437.99, helped by gains at DiGi.Com Bhd, Tenaga Nasional Bhd and Genting Malaysia Bhd.

Market watchers had earlier expected markets to mirror Wall Street’s overnight drop after the US special debt-cutting “super committee” couldn’t reach a deal on Monday.

Chris Eng, who heads OSK Research in Kuala Lumpur, points out that uncertainties surrounding the outstanding debt issues from the US to Europe, mean stock markets around the world are likely to continue being volatile. For now, he sees the FBM KLCI reaching 1,466 by mid-June, only slightly more than current levels.

To be sure, while there wasn’t an automatic downgrade, there’s no certainty that the US credit rating won’t fall further from AA+, after being stripped of its top AAA rating just a few months ago.

In Europe, more countries could face trouble servicing debts. Already government bond yields have been pushed to alarming levels for even previously perceived stronger nations like France.

Moody’s warned Monday that France too could lose its AAA rating due to rising borrowing costs amid growing economic uncertainties. Debt-laden Spain has just voted in a new government, while governments in financially troubled Greece and Italy have also fallen.

Adding to the pessimism was a comment by Chinese vice-premier Wang Qishan, who oversees trade and finance. Wang said over the weekend the world would enter a long-term recession.

Across the Causeway, Singapore’s government said Monday its economy will likely suffer a sharp slowdown next year as export demand from developed countries wanes.