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Asian stocks rebound after US Fed puts rates on hold Asian stocks rebound after US Fed puts rates on hold
(about 1 hour later)
Asian markets have rebounded after the US Federal Reserve said it will keep interest rates on hold and Wall Street had its best day in two years.Asian markets have rebounded after the US Federal Reserve said it will keep interest rates on hold and Wall Street had its best day in two years.
The decision by the US central bank to keep rates at current levels until at least 2013 helped stem one of the biggest sell-offs in recent years.The decision by the US central bank to keep rates at current levels until at least 2013 helped stem one of the biggest sell-offs in recent years.
Japan's Nikkei 225 index gained 2%, South Korea's Kospi rose 4% and Australia's ASX added 1%. Japan's Nikkei 225 index gained 2%, South Korea's Kospi rose 4% and Australia's ASX added 2%.
However, analysts say markets will remain choppy amid global growth fears.However, analysts say markets will remain choppy amid global growth fears.
They said that many investors were still concerned about global growth and the fact that the Fed did not announce any new measures to boost expansion, such as an economic stimulus package.They said that many investors were still concerned about global growth and the fact that the Fed did not announce any new measures to boost expansion, such as an economic stimulus package.
"A lot of traders will be disappointed that the Fed did not go any further," said Robin Bew of the Economist Intelligence Group. "A lot of traders will be disappointed that the Fed did not go any further," Robin Bew of the Economist Intelligence Group told the BBC's Asia Business Report.
Long-term worryLong-term worry
One of the key reasons behind the massive sell-off over the past few days has been the fear that the US, the world's biggest economy may be falling into recession.One of the key reasons behind the massive sell-off over the past few days has been the fear that the US, the world's biggest economy may be falling into recession.
Those fears were fanned last week by Standard & Poor's decision to cut the US's credit rating from triple A to AA+ for the first time. In tandem with its rates decision on Tuesday, the Fed also warned that US growth this year had been "considerably slower" than it had expected.
These events coupled with the ongoing debt issues in Europe had investors worried that demand from the two biggest economic regions in the world may weakens. That in turn would hurt growth in the export-dependent Asian economies. Kelvin Tay of UBS Bank told the BBC that markets had only reacted to the positive side of the Fed's announcement; the fact that rates would stay on hold.
Analysts said that while the markets may have overreacted to the rating downgrade, concerns about long-term growth are the main focus at present. "Markets were oversold and they were looking for a reason to rebound," he explained. "When the dust settles, people are going to focus on economic issues again."
"The immediate nervousness triggered by the downgrade...that is dissipating," said Mr Bew. "Consumption in the US is going to impacted and that is bad news for the export-dependent economies of Asia."
Structural issues
The fears about the state of the global economy were fanned last week by Standard & Poor's decision to cut the US's credit rating from triple A to AA+ for the first time.
On top of this, the ongoing debt issues in Europe have prompted many analysts to revist their own estimates for both economic and corporate profit growth.
"The immediate nervousness triggered by the downgrade...that is dissipating," said Mr Bew of the Economist Intelligence Group.
"But long-term worry, that the US and Europe have some serious issues and really don't seem to have a policy answer to them, still remains," he added."But long-term worry, that the US and Europe have some serious issues and really don't seem to have a policy answer to them, still remains," he added.
This view was echoed by Hans Goetti of Finaport Investment Intelligence.
"The US is most likely going into a recession and we are likely to see a downgrade in corporate profits," Mr Goetti said.
"The markets usually react to earnings downgrades, so this rally could be short-lived."
Broader gains
Despite the concerns, early trading on Wednesday provided markets with a respite from the recent selling spree.
Australia's ASX index added 113.6 points to 4,148.4, after erasing loses of almost 6% on Tuesday. New Zealand's main NZX 50 index added 3.5% to 3,206.2.
Shanghai's Composite Index opened 1.4% at 2,562.4. In Hong Kong, the Hang Seng jumped 3.7% to 20,045.
The gains came after markets in Europe and the US gained on Tuesday. The UK's FTSE 100 index ended up 1.9%, while France's Cac added 1.6%. The main US share index, the Dow Jones, closed up 4%.
"It's possible the bottom has been met but it is too early to say so," said Albert Hung of Alleron Investment Management.
"You never know what more bad news may be coming around the corner."