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Asian Stocks Decline for Fourth Day After China's Rate Increase

Asian stocks dropped, dragging the MSCI Asia Pacific Index to a two-week low, after China unexpectedly raised lending and deposit rates to curb inflation in the world’s fastest-growing major economy.

Asian Stocks Decline for Fourth Day After China's Rate Increase

Miner BHP Billiton Ltd., which counts China as its biggest market, declined 1 percent. Rio Tinto Group, the world’s No. 3 mining company, decreased 2 percent. Canon Inc., a Japanese camera maker that gets about 80 percent of its revenue overseas, fell 2.5 percent after the yen climbed to a one-month high against the euro. Toyota Motor Corp., the world’s largest carmaker, dropped 2.1 percent.

"The perceived problem with China raising rates is it limits economic growth from one of the higher growth economies," said Tim Schroeders, who helps manage about $1 billion at Pengana Capital Ltd. in Melbourne. "Markets in Asia have adopted a very cautious approach to today’s trading in light of this news."

The MSCI Asia Pacific Index declined 0.8 percent to 128.79 as of 12:23 p.m. in Tokyo, heading for its lowest close since Oct. 12. The measure completed its seventh weekly advance last week, the longest winning streak since 2006, on speculation growth in corporate profits will weather Europe’s debt crisis, Chinese steps to curb property-price inflation and concern about the pace of the U.S. economic rebound.

Japan’s Nikkei 225 Stock Average dropped 2.2 percent, while Hong Kong’s Hang Seng Index lost 0.9 percent. Australia’s S&P/ASX 200 Index slid 0.9 percent.

Asset-Price Bubble

Futures on the Standard & Poor's 500 Index rose 0.2 percent. The index lost 1.6 percent yesterday, the biggest drop since Aug. 19, amid concern banks will be forced to buy back soured mortgages and after Apple Inc. forecast profit that missed analyst estimates.

Asian equities fell today after China’s central bank raised one-year lending and deposit rates by 25 basis points, boosting borrowing costs for the first time since 2007. Policy makers are trying to curb lending and prevent an asset-price bubble in a country that surpassed Japan this year as the world’s second- largest economy even as growth in the U.S. and Europe slowed.

A gauge of raw-material producers in the MSCI Asia Pacific Index dropped 1.5 percent, the most of 10 industry groups, on concern the rate increase in China will crimp demand in the world’s biggest energy-using country.

BHP, the largest mining company in the world, declined 1 percent to A$40.76. Rio Tinto decreased 2 percent to A$80.99. Mitsubishi Corp., Japan’s biggest commodities trader, fell 4.1 percent to 1,966 yen. Smaller rival Mitsui & Co. tumbled 5.3 percent to 1,259 yen.

Commodity Slump

Crude oil for November delivery sank 4.3 percent to settle at $79.49 a barrel yesterday in New York, the steepest drop since Feb. 4. The London Metal Exchange Index of six metals including aluminum and copper lost 2.1 percent yesterday, the largest decline since Oct. 7.

The MSCI Asia Pacific Index has risen 6.8 percent this year as government and industry reports from the U.S. and China fueled confidence in the global economic recovery. Stocks on the gauge trade at 14 times estimated profit on average, compared with 14.1 times for the S&P 500 and 12.3 times for the Stoxx Europe 600 Index.

Bank of England Governor Mervyn King yesterday called for “collective” policy action to rebalance the world economy. Failure to find common ground risks the imposition of trade barriers and weaker global growth, he said before a meeting later this week of Group of 20 finance ministers and central bankers in South Korea.

Stronger Yen

Japanese exporters dropped as the yen climbed to a one- month high against the euro, threatening to reduce the value of European sales when repatriated. The yen rose to 111.56 per euro, the highest since Sept. 21, from 112 yesterday in New York.

Canon slipped 2.5 percent to 3,740 yen. Panasonic Corp., the world’s biggest maker of plasma televisions, decreased 1.8 percent to 1,173 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, fell 1.5 percent to 2,657 yen. Toyota Motor dropped 2.1 percent to 2,864 yen.

Source : Bloomberg

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