By Alex Richardson
SINGAPORE, Feb 9 (Reuters) - Shares in Asian developed
markets rose and the dollar and Swiss franc eased on Wednesday
as investors bet that China's latest interest rate rise would
not derail hopes of a sustained economic recovery.
Increased investor appetite for riskier assets was also
evident in the bond market, with the five-year Japanese
government bond yield climbing to a 15-month high, continuing a
global trend of rising yields on government debt.
China raised interest rates by 25 basis points late on
Tuesday, its second increase in just over six weeks. The timing
was a surprise, coming on the final day of the Lunar New Year
holiday, but investors had been expecting further tightening
from Beijing to rein in stubbornly high inflation.
"Chinese policymakers' efforts to rein in overheating
pressures are now seen in a relatively more positive light by
global investors in that they will help slow growth to a more
sustainable pace, while other engines of growth in the region
begin to rev up," said Samarjit Shankar, analyst at BNY Mellon.
Mainland Chinese stocks on their first day of
trading following a week-long break, see-sawed between positive
and negative territory and Hong Kong shares opened firmer
before dipping into the red.
Japan's Nikkei was up 0.2 percent after touching a
9-month high and Australia's benchmark index was also up
0.3 percent.
But MSCI's index of Asia Pacific shares outside Japan
fell 0.4 percent, weighed down by a 1 percent
decline in South Korean stocks , with market players
reporting weakness in firms most exposed to China and a stronger
won .
"The Chinese rate hike had been expected for some time,"
said Lee Sun-yeb, a market analyst at Shinhan Investment Corp in
Seoul. "However, investors are reacting to it be offloading
issues that are sensitive to forex swings and Chinese demand."
SWITCHING FUNDS
Japan has been Asia's best performing market so far this
year as healthier corporate profits and worries about building
inflationary pressures have encouraged investors to switch money
from fast-growing emerging markets -- last year's star
performers -- to developed market equities.
The Dow Jones industrial average notched a seventh
straight day of gains on Tuesday, rising 0.6 percent, as
surprisingly strong sales by McDonald's boosted optimism about
consumer spending.
But technical indicators show it is overbought after a
strong run-up that began in September, leaving U.S. markets
prone to a pullback or a correction.
While monetary policy in the rich world remains ultra-loose,
central banks in emerging markets, especially in Asia, have been
tightening policy to rein in inflation fuelled by rising
commodity and energy prices and strong domestic growth.
Higher borrowing costs in China could support Asian
currencies -- generally unwelcome for the exporters that power
many regional economies -- by highlighting policymakers
determination to tackle rising prices.
"Looking at this rate hike from a regional perspective, it
is a necessary move to curb inflation pressures in the region,"
said Pin Ru Tan, emerging markets forex and rates strategist at
the Royal Bank of Scotland in Singapore.
The Swiss franc , seen as a safe-haven currency, fell
across the board on Wednesday and the dollar index , which
measures the U.S. currency against a basket of major currencies,
was slightly weaker.
Gold , often seen as an inflation hedge, eased to
around $1,362 an ounce, after rising around 1 percent in the
previous session.
U.S. crude oil futures rose 29 cents to $87.23 a barrel
after U.S. data showed an unexpected drawdown in stocks.
News of China's rate hike hit commodities markets in London
and New York initially, but prices soon rebounded as investors
felt the size of the increase was not enough to stifle its
voracious demand for raw materials.
(Editing by Kim Coghill)
