BANKING authorities in Taiwan, Hong Kong and South Korea cut interest rates a day after reductions by the central banks of the United States, Europe and China to stem damage from the global financial crisis.
The Bank of Korea and Taiwan lowered their rates by a quarter of a percentage point and Hong Kong cut its benchmark to 2 percent. The Bank of Japan, which kept its policy rate at 0.5 percent this week, pumped 2 trillion yen (US$20 billion) into the financial system.
Stocks in Japan, South Korea and Hong Kong all rose after the rate cuts, snapping market declines that have helped wipe more than US$5 trillion off stocks globally this month. The International Monetary Fund on Wednesday forecast the world's advanced economies will expand at the weakest pace since 1982 next year, sapping growth in emerging nations.
"Investors are a bit relieved with the Asian central banks' actions, which will support flagging economies," said Mamoru Yamazaki, chief Japan economist at RBS Securities Japan Ltd in Tokyo. "The relief also comes from confirming that those banks are flexible enough for more rate cuts."
The Federal Reserve, European Central Bank and four other central banks lowered rates by a half point on Wednesday in an unprecedented, emergency coordinated bid to reduce fallout from the worst financial meltdown since the Great Depression.
Within minutes of Wednesday's joint action, the People's Bank of China pared its one-year lending and deposit rates by 0.27 percentage points, Bloomberg News said.
The Bank of Korea yesterday lowered the seven-day repurchase rate to 5 percent, the first cut in four years. The Taiwan bank reduced the discount rate on 10-day loans to banks to 3.25 percent. Hong Kong trimmed its base rate to track the Fed's move.
The MSCI Asia Pacific Index added 0.7 percent to 92.04 as of 4:09pm in Tokyo, ending a five-day, 16-percent slump. South Korea's Kospi index climbed 0.6 percent, Japan's Topix index gained 0.7 percent and Hong Kong's Hang Seng index rose 2.7 percent.
"Policy makers around the world are now extremely keen to boost economic and market activity," said Sherman Chan, an economist at Moody's Economy.com in Sydney. "The effects of the global rate cuts are expected to be positive, but will take time to flow through to the economy and financial markets."
The Reserve Bank of Australia, which slashed its benchmark rate by 1 percentage point this week, added A$3.49 billion (US$2.3 billion) to money markets yesterday.
New Zealand's central bank said it will increase the range of securities it accepts from lenders to help boost liquidity.
"We are committed to ensuring the ongoing health of the financial system and remain ready to respond as appropriate," Reserve Bank of New Zealand Governor Alan Bollard said.
The rate cuts in South Korea and Hong Kong did little to free up credit as banks continued to hoard cash on concern that borrowers may become unable to repay loans.
Hong Kong's three-month interbank offered rate jumped 25 basis points to 4.4 percent, a one-year high.