Asian shares down after Yellen hints at rate hike

A woman walks by an electronic stock board of a securities firm in Tokyo on Thursday, March 20, 2014. Asian stocks inched down Thursday after comments from the new head of the Federal Reserve suggested US interest rates could rise sooner than financial markets were anticipating. AP PHOTO/KOJI SASAHARA

HONG KONG—Asian markets fell on Thursday after the head of the US Federal Reserve hinted that the central bank could raise interest rates sooner than expected.

The comments by Janet Yellen followed an expected third successive cut in the Fed’s quantitative easing (QE) stimulus program, and took markets by surprise, boosting the dollar and sending Wall Street tumbling.

Tokyo dropped 1.65 percent, or 238.29 points, to 14,224.23, Sydney gave up 1.15 percent, or 61.6 points, to 5,294 and Seoul fell 0.94 percent, or 18.16 points, to close at 1,919.52.

Shanghai closed 1.40 percent lower, giving up 28.26 points to 1993.48, while Hong Kong shed 1.79 percent, or 386.53 points to 21,182.16.

Emerging markets were also hit as higher borrowing costs could see foreigners repatriating their money back to the United States. QE has been credited with fueling a boom in developing nations as traders pumped cheaper cash into them in search of better returns on their investments.

Taipei closed 1.06 percent, or 92.13 points, lower at 8,597.33, while Manila was down 0.70 percent, giving up 45.14 points to end at 6,417.35.

However, Wellington bucked the trend and rose 0.11 percent, or 5.68 points, to close at 5,160.39 after data showed New Zealand’s economy picked up in 2013, helped by strong manufacturing.

The Fed on Wednesday lopped a further $10 billion a month off its bond-buying scheme—following similar moves at its past two meetings—saying the economy was picking up and a recent spate of soft data was caused by severe winter weather.

It also said it would scrap its target of 6.5 percent unemployment and 2.5 percent inflation before considering an interest rate increase from the current record lows.

‘Era of strong dollar, weak stocks’

While that was expected, investors were rattled when Yellen, the bank’s new chair, said at a news conference that the timeframe for a rate rise could be “on the order of around six months” after the stimulus ends.

With the present rate of reduction likely to see QE tapered off by the end of the year, that means rates could go up in the first half of 2015.

Michael James, managing director of equity trading at Wedbush Securities, said the timeframe suggested a rise in rates would come sooner than the market had been expecting.

The remarks sent US stocks lower—the Dow fell 0.70 percent, the S&P 500 lost 0.61 percent and the Nasdaq shed 0.59 percent—while the dollar rallied.

“Yellen can be seen as not being so dovish as expected,” said Hiromishi Shirakawa, research analyst at Credit Suisse. “We should pay attention to the possibility that the era of a firm dollar and weak stocks will start,” he said in a note.

The greenback jumped to 102.32 yen in New York from 101.51 yen in Tokyo earlier Wednesday. On Thursday afternoon in Asia, the US unit was trading at 102.38 yen.

The euro was sitting at $1.3833 compared with $1.3827 in New York and $1.3920 Wednesday in Tokyo.

The European single currency fetched 141.63 yen against 141.53 yen.

Gold fetched $1,325.28 an ounce at 0810 GMT compared with $1,346.53 late Wednesday.

In other markets:

– Bangkok lost 0.21 percent, or 2.80 points, to 1,361.47.

Telecoms company True Corporation fell 1.40 percent to 7.05 baht, while oil company PTT rose 1.03 percent to 293.00 baht.

– Jakarta slipped 2.54 percent, or 122.48 points, to 4,698.97.

Miner Aneka Tambang lost 4.24 percent to 1,130 rupiah, while Bank Negara Indonesia fell 4.32 percent to 4,765 rupiah.

– Kuala Lumpur’s main stock index ended flat at 1,818.17.

Financial firm CIMB Group Holdings climbed 0.4 percent to 7.10 ringgit, while Axiata Group added 0.5 percent to 6.52. SapuraKencana Petroleum fell 1.0 percent to 4.17 ringgit.

– Mumbai’s benchmark index fell 0.42 percent, or 92.77 points, to end at 21,740.09 points.

Mahindra & Mahindra Financial Services fell 4.85 percent or 13.20 rupees to 259.15 rupees per share. Unitech shed 4.45 percent or 0.53 rupees to 11.37 rupees per share.

– Singapore closed down 0.76 percent, or 23.55 points, at 3,057.20.

Oil rig maker Keppel Corp. eased 0.86 percent to Sg$10.43 while Oversea-Chinese Banking Corporation also lost 0.65 percent to Sg$9.24.

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