Asian stocks rise, brushing off China's rate hike

[December 27, 2010]  HONG KONG (AP) -- Asian stock markets rose Monday, shrugging off a weekend move by China's central bank to raise interest rates in a bid to rein in soaring inflation.

In thin trading with some Asian markets closed for a holiday, investors downplayed China's second rate hike in just over two months as a widely expected move. Traders had speculated that China would further tighten its monetary policy to cool inflation.

"The interest rate hike this time seems not out of line with investors' expectation, therefore it hasn't made a lot of negative impact on market sentiment for now," said Xu Zhiyuan, an analyst at Capital-Edge Investment & Management in Shanghai. "In the long-term, we think mainland markets will still go up due to the growing macro-economy and government control."

The Shanghai Composite index gained 18.75 points, or 0.7 percent, to 2,854.91 in the morning session while the Shenzhen Composite Index for China's smaller, second market rose 9.46 or .07 percent to 1,301.48.

Japan's benchmark Nikkei 225 stock average rose 9,680 points, or 0.9 percent, to 10,375.99 while South Korea's Kospi was up 2.84, or 0.1 percent, to 2,032.44.

Benchmarks in Singapore, Taiwan and Thailand were also higher. Australia, New Zealand and Hong Kong markets were closed Monday for the Christmas holiday.

China's rate hike announced Saturday will lift the benchmark lending rate by 25 basis points to 5.81 percent. The Chinese central bank said the one-year deposit rate will also climb by 25 basis points to 2.75 percent.

Beijing made similar moves Oct. 19 to tame inflation. It is an especially sensitive issue in China, where poor families spend up to half their incomes on food and rising inflation could threaten political stability.

Inflation in China jumped to 5.1 percent in November -- a 28-month high -- despite a crackdown on speculation and repeated moves to curb a flood of money circulating in the economy from massive stimulus spending and bank lending.

In currencies, the dollar dipped to 82.86 in Tokyo on Monday from 82.89 yen in New York late Friday. The euro stood at $1.3125 from $1.3113.

The U.S. stock markets were closed Friday for Christmas.

Benchmark oil for February delivery fell 17 cents to $91.34 in electronic trading on the New York Mercantile Exchange.

[Associated Press]

Researcher Ji Chen in Shanghai contributed to this report.

Copyright 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.