Asian markets down amid ECB loan skepticism

HONG KONG—Asian markets slipped on Thursday as traders questioned whether a European Central Bank move to pump cheap cash into banks would be enough to unclog credit markets and ease the region’s debt crisis.

Following the ECB’s announcement that it would provide three-year loans at rates as low as one percent, a total of 523 banks snapped up a record 489.2 billion euros ($641 billion).

However, some market watchers said the fact that so many institutions jumped in so quickly highlighted the precarious state that they were in.

Tokyo ended 0.77 percent, or 64.82 points, lower at 8,395.16 and Sydney shed 1.18 percent, or 48.7 points, to close at 4,090.8, while Seoul was flat, nudging 0.92 points down to 1,847.49.

Hong Kong fell 0.21 percent, or 38.22 points, to 18,378.23 and Shanghai ended 0.22 percent lower, shedding 4.85 points to 2,186.30.

The ECB move – along with strong US data, a successful Spanish bond auction and upbeat German confidence indicators – helped boost Asian markets and the euro on Wednesday but doubts soon returned Thursday.

Until now, the ECB has lent for a maximum of one year and the new arrangement is part of a series of unprecedented measures to keep credit flowing in Europe at a time when banks are increasingly wary of lending to each other due to the debt crisis.

With pressure on the bank not to become lender of last resort for indebted economies, the latest plan was for banks to use the cheap money to ease their own cash flows and also buy up government debt.

“The euphoria surrounding the ECB’s three-year tender quickly dried up, perhaps on the idea that the huge pick-up in liquidity will push the ECB further away from doing what the market ultimately wants them to do: print euros,” Chris Weston, Institutional Dealer at IG Markets said in a note.

And Fumiyuki Nakanishi, general manager of investment & research at SMBC Friend Securities, said: “It’s unclear if banks will use the funds to buy sovereign bonds whose yields remain elevated and how ratings firms evaluate banks that have made such purchases.”

“The crisis isn’t over,” he told Dow Jones Newswires.

The euro, which jumped as high as $1.3188 in New York on Wednesday, eased in Asia Thursday to $1.3096, while it gained to 102.25 yen from 101.88 yen.

The dollar was at 78.06 yen, almost unchanged from 78.05.

On oil markets, New York’s main contract, light sweet crude for delivery in February, added 61 cents to $99.28 a barrel and Brent North Sea crude for February rose 54 cents to $108.25 in the afternoon.

Gold was trading at $1,614.60 an ounce at 0950 GMT, against $1,637.97 an ounce late Wednesday.

In other markets:

— Singapore closed 0.32 percent,or 8.52 points, lower at 2,664.80.

Oversea-Chinese Banking Corp. lost 1.25 percent to Sg$7.90 and Jardine Cycle and Carriage was down 1.44 percent at Sg$48.68.

— Taipei was virtually unchanged, dipping 0.13 points to 6,966.35.

Cathay Financial Holding rose 4.01 percent to Tw$31.15 while Taiwan Semiconductor Manufacturing Co. was 1.32 percent lower at Tw$75.0.

— Manila was flat, edging up 1.58 points to 4,370.46.

BDO Unibank climbed 1.04 percent to 58.40 pesos, while shares of Lepanto Consolidated Mining added 2.56 percent to 1.60 pesos but Ayala Land eased 0.26 percent to 15.46 pesos.

— Wellington fell 0.49 percent, or 15.84 points, to 3,207.24.

Telecom fell 2.2 percent to NZ$1.97, Sky Television gained 2.7 percent to NZ$5.38 and Auckland Airport was up 1.2 percent at NZ$2.47.

— Kuala Lumpur rose 0.44 percent, or 6.48 points, to 1,491.46.

YTL Corp. fell 2.0 percent to 1.51 ringgit, Gamuda eased 0.3 percent to 3.18 ringgit and Hong Leong Bank gained 3.0 percent to 10.86 ringgit.

— Jakarta was flat, nudging 1.18 points higher to 3,795.44.

— Bangkok shed 0.12 percent, or 1.23 points, to 1,042.52.

— Mumbai closed 0.82 percent, or 128.15 points, higher at 15,813.36.