Asian markets mixed after Fed stimulus taper

An investor looks at the stock price monitor at a private securities company Thursday, Dec. 19, 2013, in Shanghai, China. Asian markets were mixed Thursday after investors took the US Federal Reserve’s decision to trim its stimulus as a vote of confidence the American economy is strengthening. AP PHOTO

HONG KONG—Asian markets were mixed on Thursday after the US Federal Reserve said it would start cutting its stimulus program next month, in a sign of confidence in the country’s economic recovery.

The announcement that the bank will whittle down the scheme by $10 billion a month to $75 billion, while keeping interest rates at record lows, sent US shares surging to new records.

Tokyo jumped 1.74 percent, or 271.42 points, to 15,859.22, Sydney rallied 2.08 percent, or 106.1 points, to 5,202.2 and Seoul was flat, edging up 1.02 points to 1,975.65.

Shanghai fell 0.95 percent, or 20.50 points, to 2,127.79 and Hong Kong lost 1.10 percent, or 255.07 points, to close at 22,888.75 on concerns about China’s economic outlook.

Shares in emerging economies—which have been in turmoil at the prospect of an end to the bond-buying—were mostly lower, surrendering earlier gains.

Manila fell 0.64 percent, or 38.43 points, to end at 5,923.12 while Bangkok lost 0.24 percent, or 3.23 points, to close at 1,346.63.

Jakarta ended up 0.85 percent, or 35.70 points, at 4,231.98.

The Fed on Wednesday said it would reduce its bond-buying by a modest $10 billion to $75 billion a month from January, citing data indicating the economy is strengthening.

“In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions, the committee decided to modestly reduce the pace of its asset purchases,” the bank’s policy committee said in a statement.

It added that it would likely take “further measured steps at future meetings” if the economy continues to improve.

Policymakers also said they would keep interest rates at record lows “well past the time” that the unemployment rate declines below 6.5 percent— its previous cut-off point before tightening monetary policy.

While global markets have been falling on expectations of a taper, the relatively small reduction, and the likelihood of interest rates being kept ultra-low, provided a boost.

The Dow soared 1.84 percent and the S&P 500 jumped 1.66 percent, both hitting new records, while the Nasdaq rose 1.15 percent.

Edward Fung, investment advisory head at Kim Eng Securities in Hong Kong, told Dow Jones Newswires: “From how the US market reacted, it seems to me that $10 billion tapering is nothing to investors compared to the Fed’s commitment to hold interest rates at a low level.”

Despite a late dip in their markets, the news was also welcomed in developing countries, which have declined in recent months as investors repatriate cash back to the United States.

Bank Indonesia deputy governor Perry Warjiyo said: “The amount of tapering is slightly less than expected. More importantly, the announcement provides more clarity to the direction of Fed monetary policy. That will be positive for financial market stability.”

The dollar hit new five-year highs in New York after the announcement. It peaked at 104.36 yen at one point—up from levels below 103 yen earlier in Tokyo—before settling at 104.13 yen. In afternoon Japanese trade Thursday it fetched 103.96 yen.

The US unit also edged down against the euro, which bought $1.3690 Thursday against $1.3680 in New York. The euro was also at 142.32 yen compared with 142.56 yen.

The Australian dollar sank to a three-year low of 88.21 US cents at one point from 89.04 cents Wednesday, but climbed to sit at 88.45 cents in the afternoon.

Against emerging market units the greenback rose to 1,060.22 South Korean won from 1,052.35, to 62.11 Indian rupees from 61.87 rupees and to 32.35 Thai baht from 32.23 baht.

The greenback generally benefits from tighter US monetary policy as it means fewer dollars flowing around the financial system.

Oil prices were mixed with New York’s main contract, West Texas Intermediate for January delivery, up 28 cents at $98.08 in afternoon trade. Brent North Sea crude for February eased 36 cents to $109.27.

Gold fetched $1,205.05 at 1115 GMT compared with $1,232.79 late Wednesday.

In other markets:

— Mumbai closed down 0.73 percent, or 151.24 points, at 20,708.62 points.

Pharma company Wockhardt was up 36.55 rupees or 9.60 percent at 417.25 rupees. Reliance Capital was down 4.45 percent or 16.00 rupees to 343.80 rupees.

— Singapore closed up 0.28 percent, or 8.45 points, at 3,070.23.

DBS Bank rose 0.61 percent to Sg$16.59 while Singapore Telecom eased 1.95 percent to Sg$3.52.

— Kuala Lumpur dipped 1.32 points, or 0.07 percent, to 1,846.18.

UMW Holdings ended 1.3 percent lower at 12.06 ringgit while Genting Malaysia lost 0.5 percent to 4.33. British American Tobacco was up 1.6 percent to 64.00 ringgit.

— Taipei added 0.70 percent, or 58.36 points, to end at 8,407.40.

Taiwan Semiconductor Manufacturing Co. put on 1.5 percent to Tw$102.5 while Hon Hai Precision was 0.5 percent higher at Tw$79.3.

— Wellington rose 0.67 percent, or 31.18 points, to 4,707.06.

Contact Energy was up 1.44 percent at NZ$4.94, Fletcher Building added 2.16 percent to NZ$8.53 and Chorus was down 2.10 percent at NZ$1.40.