By Dow Jones Business News, September 20, 2013, 05:57:00 AM EDT
By Daniel Inman
Shares in Bombay led Asian markets lower on Friday after the Reserve Bank of India's surprise rate hike, while profit-
taking hit stocks particularly sensitive to economic swings as well as most emerging-market currencies a day after
Investor sentiment turned cautious in late Asian trade after the Reserve Bank of India raised its key lending rate by
a quarter percentage point to 7.5% in a bid to curb inflation. None of the dozen economists polled by The Wall Street
Journal had predicted the change in the key policy rate.
India's stock benchmark S&P/BSE Sensex fell 2.1%, while the U.S. dollar rose to 62.47 rupees, from 61.88 rupees
before the announcement.
Friday was also a day of profit-taking in Asia after the U.S. Federal Reserve's decision to stick with its stimulus
measures boosted regional markets in the previous session.
"Today looks like being one of those Fridays where markets take stock after a big news week," said Ric Spooner, chief
market analyst at CMC Markets. "We may see some profit-taking by short term sellers disappointed that yesterday's strong
upward momentum was not followed through," Mr. Spooner added.
Australia's S&P/ASX 200 fell 0.4%, Indonesia's JSX fell 1% and Thailand's SET dropped 0.5%.
Japan's Nikkei fell 0.2% as the U.S. dollar weakened slightly in Asia after it strengthened against the yen (USDJPY)
Thursday. The greenback was at Yen99.25 Friday, after a 1.6% gain in the previous session.
In Sydney, resources plays and financials pulled back after their recent strong gains. BHP Billiton ( BHP ) lost 0.8%,
Rio Tinto ( RIO ) fell 1.1% and Westpac ( WBK ) was down 0.7%.
In Tokyo, real-estate firm Mitsubishi Estate Co. (MITEF) rose 1% after the average land price in greater Tokyo, Osaka
and Nagoya rose 0.1% on year as of July 1 , the first on-year rise in five years.
Also in Tokyo, retailer Aeon Co. (AONNF) dropped 0.5% after a Nikkei report said that the company's consolidated
operating profit for the six months ended August 31 will likely fall short of market consensus.
Still, Southeast Asian markets looked set to post healthy returns for a week that was dominated by developments
suggesting that U.S. monetary policy could remain easier than previously expected.
On Monday, stocks rose after Lawrence Summers withdrew from the race to become the next chairman of the Federal
Reserve - a candidate expected to roll back the central bank's stimulus soon after taking the post.
Markets on Thursday received another boost from the Fed's surprise decision to keep its monetary policy steady, going
against widespread expectations for the bank to start reducing its bond-buying program.
As a result Southeast Asian markets that had been beaten down over the summer made substantial gains. The fear of a
removal of U.S. stimulus efforts, which had supported these small markets in recent years, prompted investors to pull
their money out of countries like Indonesia and the Philippines.
The gains this week helped the recovery of these markets: Philippines' PSE Composite was 6.5% higher since last Friday
and Thailand's SET jumped 5.7% over the same period.
Much of North Asia was closed for public holidays Friday, with mainland China, Hong Kong and South Korea shut. Markets
in Shanghai and Seoul were closed on Thursday as well, which means that they haven't had a chance to react to the Fed's
latest policy decision.
When these markets reopen Monday, there will also be a data point on the Chinese economy in the form of preliminary
manufacturing data for September, a number that has impacted markets in recent months.
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