By Alexandra Stevenson
Published: February 20 2010 02:00 | Last updated: February 20 2010 02:00
A midweek surge for stocks was wiped out by yesterday's losses with Asia's equity markets becoming the initial region to react to the US Federal Reserve's move to lift emergency discount lending rates for the first time since the start of the financial crisis.
The FTSE Asia-Pacific index enjoyed its best one-day gains in nearly three months on Wednesday, only to slump 2 per cent to 220.07 yesterday for a 0.8 per cent weekly decline, with banks and commodity stocks leading both the ascent and subsequent descent.
Volatility in the market was exacerbated by thinner trading with several markets closed at the start of the week and the Shanghai Composite closed all week for Chinese new year.
"The market is overreacting to the [Fed] news," said Michiya Tomita, of Mitsubishi UFJ Asset Management in Hong Kong. "There are also fewer market participants this week due to the Chinese new year."
The Hang Seng index, which reached a two-week high on its first post-holiday day of trading on Wednesday, pared those gains by the end of the week, taking the hardest hit among Asian markets and falling 1.8 per cent to 19,894.02.
The Fed's decision to raise the discount rate boosted the US dollar, helping to drive commodity prices and stocks in the region down.
Newcrest Mining , Australia's largest gold producer, shed 2.7 per cent during the week to close at A$31.80.
Lihir Gold , the nation's second-largest gold producer,dipped 4.9 per cent to A$2.72.
CNOO C , China's largest offshore oil producer, was down 3.3 per cent to HK$11.78.
PetroChina , China's biggest oil producer, rose 2 per cent on Wednesday but by the end of the week had lost 1.3 per cent to HK$8.50.
Retail shares lost ground with L i & Fung , Walmart's biggest supplier of clothes and toys, dropping 3.6 per cent yesterday to HK$35.10 after the US retailer reported a drop in holiday sales.
Hong Kong-based retailer Esprit Holdings was the biggest mover in the Hang Seng during the week, sinking 5.8 per cent to HK$54.30.
In Tokyo, the Nikkei 225 Average edged up 0.3 per cent to 10,123.58.
With Shanghai closed all week, investors did not have a chance to see how mainland equities would react to last week's Chinese central bank announcement that it was increasing capital reserve requirements for banks.
But the index of mainland companies listed in Hong Kong, or H shares, fell 2.4 per cent during the week to 11,263.83.
Australia's S&P/ASX 200 fared well during the week, rising 1.6 per cent, while South Korea's Kospi index was flat at 1,593.90. India's BSE Sensex gained 0.2 per cent to 16,191.63.
