ASEAN KEY DESTINATIONS
Commodities see slower growth
Observers said investors were still cautious as the recovery, particularly in the developed economies, was still fragile while inflation in emerging economies could now affect demand. Nomura Singapore Ltd economist Euben Paracuelles said that the bullish sentiments in the commodity markets could have been impacted by Asian policymakers' move to tighten monetary policy.
The move came as a run-up in commodity prices to multi-year highs have largely been due to rising demand especially from China and India over the past two years. This has stoked inflation with food prices soaring and made worst by the higher cost of transportation.
“There may be concerns that with inflation rising, growth in the emerging economies will slow at some time,” Paracuelles pointed out.
Malaysia and the Philippines raised benchmark interest rates by 25 basis points on Thursday while India raised the repurchase rates on May 3 by 50 basis points.
Credit Suisse Group AG economist Kun Lung Wu said in a report that Bank Negara might raise rates by 50 basis points within the next 12 months as the increase suggested the central bank was more comfortable with the domestic growth outlook.
He added that the next rate hike was likely to be earlier rather than later.
Meanwhile, China might increase rates again next week after the People's Bank of China said in its quarterly monetary report that stabilising prices and inflation expectations were its current priority.
The jitters among investors were reinforced by the latest US jobs data, which showed initial jobless claims were higher than expected.
Investors reacted by a sell-off on Wall Street on Thursday.
The sell-off continued into yesterday with Asian markets closing in the red. Red flags were also raised after European Central Bank president Jean-Claude Trichet said an interest rate hike in June was unlikely.
United Overseas Bank Ltd economist Ho Woei Chen said risk appetite could also have taken a backseat after a report by a housing data firm showed a possible double-dip in house prices. “Economic recovery is still choppy and we can see risks coming back again to the eurozone, in particular for the weaker members who'll be holding bond auctions in the coming weeks,” she said.
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