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3 Asian central banks slash interest rates
Published in Saudi Press Agency on 09 - 10 - 2008


South Korea, Taiwan and Hong
Kong all slashed interest rates Thursday, joining in a
chorus of cuts by central banks around the world aimed at
fighting the global financial crisis, AP reported.
The moves follow Wednesday's coordinated rate reductions
led by the U.S. Federal Reserve and the European Central
Bank. China's central bank also cut rates Wednesday,
thought did not say if it was part of the joint action.
Investors generally cheered the moves, although stock
market gains faded as trading progressed and investors
reassessed the severe strains on credit markets.
Hong Kong's benchmark index rose 3.5 percent and South
Korea's index edged up 0.6 percent after earlier rising as
much as 2.9 percent. Markets in Taiwan and Japan, up
initially, fell into negative territory by day's end.
The coordinated reductions this week will not provide a
quick fix to the crisis, according to one economist.
«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,» Sherman Chan of Moody's
Economy.com wrote in a note Thursday. «A sharp rebound in
market conditions is highly unlikely _ improvement will
come only at a slow pace.»
Citing dangers related to the financial crisis that has
spread from the U.S. to Europe and beyond, the Bank of
Korea cut its key seven-day repurchase rate by a quarter
percentage point to 5 percent.
«The downside risk to economic growth has increased,
largely due to the international financial market unrest
and global economic slowdown,» the bank said in a
statement. It added that the cut «should contribute to
soothing the financial market turmoil and to avoiding a
severe contraction of economic activity.»
It was the Bank of Korea's first rate cut since November
2004, and comes despite a drop in the South Korean won to
10-year lows. Just two months ago, the bank had raised
rates to combat accelerating inflation.
Seoul's benchmark Korea Composite Stock Price Index rose
as much as 2.9 percent after the announcement, but pared
gains to close 0.6 percent higher at 1,294.89.
In Hong Kong, the region's de facto central bank cut its
benchmark interest rate for a second day in a bid to boost
investor confidence, matching the overnight cut by the Fed.
The Hong Kong Monetary Authority cut its key base rate by
half a point to 2 percent, a day after it lowered it by a
full percentage point.
«The coordinated rate cuts by global central banks is
unprecedented and that reflected the seriousness of the
financial crisis of this century,» said HKMA Chief
Executive Joseph Yam, referring to the reductions of half a
percentage point by the Fed, the ECB, the Bank of England
and others.
And in Taipei, Taiwan's Central Bank said it was cutting
its key interest rate for the second time in two weeks,
amid slowing economic growth.
The cut on the 10-day loan rate to 3.25 percent from 3.5
percent came because Taiwan's exports have declined while
consumer and investment expenditures dropped, the central
bank said.
«Our economy has come under pressure for a slowdown,»
Gov. Perng Fai-nan said. «We hope the rate cut can
stimulate consumption to spur economic growth.»
The announcement helped to stabilize the Taiwan stock
market early Thursday after the benchmark index fell 9.3
percent in the last three trading days in the wake of the
financial crisis in the U.S. and Europe. Stocks were
trading 1.5 percent lower in the afternoon.
The moves follow a full point rate cut by Australia on
Tuesday and China's move Wednesday to reduce the rate on a
one-year loan by 0.27 percentage point to 6.93 percent, its
second cut in less than a month.
The Bank of Japan left its key rate unchanged at 0.5
percent, but said it supported the coordinated rate cuts
led by the Fed.


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