Cheer over interest rate cut short-lived

Cheer over interest rate cut short-lived

SINGAPORE (AFP): The latest U.S. interest rate cut was
welcomed as a reassuring sign on Wednesday by most of Asia's
stock markets, but profit-taking took a little shine off regional
gains.

There was generally positive sentiment that the lowering of
short-term interest rates in the United States would further
boost Asian currencies and consequently regional share markets.

Positive impact from the rate cut was strongest in Jakarta,
where the benchmark composite index rose by 3.9 percent or 13.768
points to 369.994, despite concerns over the unstable political
situation there following violent clashes there last week.

"The Fed's rate cut is likely to boost regional currencies,
which is positive for regional stock markets," a Harita Kencana
Securities analyst said.

Singapore share prices advanced 2.9 percent, with cheer over
the U.S. interest rate-cut matched by a surprise half-point cut
in the prime rate of Singapore's biggest local bank Development
Bank of Singapore.

The Straits Times Index closed 35.94 points higher at
1,271.70.

The cut in the DBS prime rate to 6.0 percent has triggered
expectations of a further reduction before the year-end, dealers
said.

"We think there could be another cut before Christmas,
although this will depend partly on what the Fed does before the
end of the year," said a dealer with a European bank here.

Manila's key stock index rose 2.3 percent or 41.54 points to
end at 1,820.77.

"Whatever level of cut that the Fed decides upon will be
positive for the market," said Jasmine Juanico of Anscor-Hagedorn
Securities Inc. in Manila, adding that "it could have a trickle
down effect on the troubled economies like the Philippines."

The euphoria was more subdued in Hong Kong, where analysts
said the U.S. rate cut had been anticipated and factored into
trade. The key Hang Seng index gained 64.73 points or 0.6 percent
to close at 10,213.42.

Paul Shulte, ING Barings strategist in Hong Kong, said the
rate cut highlighted a dilemma for fund managers.

As rates decline, "the opportunity cost of holding cash is
rising," forcing fund managers to push more money into equities
"even though they don't believe in the rally," Shulte said.

The impact was limited in Tokyo, where the Nikkei-225 average
of the Tokyo Stock Exchange closed 1.3 percent up, boosted more
by active public fund buying in futures, brokers said.

The index rose 186.23 points to finish at 14,599.23.

A Marusan Securities broker noted "negative factors such as
uncertainties about the U.S. market outlook are beginning to
disappear."

An analyst with Phillipe (Thailand) Securities said that
although the market reacted positively to the U.S. rates cut,
gains could be short-lived with profit-taking likely to set in.

The Stock Exchange of Thailand's (SET) broad-based index rose
by 0.3 percent or 1.05 points to 345.13.