Asian stock markets went down sharply in the wake of subdued economic growth in the U.S. and the China’s decision to control the surging stock market. Amidst growing speculations that Federal Reserve is unlikely to cut interest rate this time around despite strong U.S. job report and weak performance at Wall Street further dampened the Asian market.
The stocks have also been affected by the recent decision of china to increase reserve requirement ratio for banks to 9.5 percent, which likely to come into effect on 15 January. This move by China is likely to drain around $20.45 billion from the banking system which definitely have significant effect on the Asian stock markets.
Now concerns in business sphere are high that China’s stock market is overheating and the recent move will adversely impact the local trade. On the other hand, Chinese authorities are by raising reserve requirements intended to restrain lending activities and control the liquidity in Chinese monetary system.
Recently, Federal Reserve had indicated that the inflation is still their foremost concern as it is still higher than desired level triggering the speculations that the Federal Reserve may contemplate another interest rate hike. The business sphere in the U.S. meddling with these concerns cooled down the market even when the manufacturing sector was faring well.
While the U.S. market will definitely improve with the time and it would definitely encourage the Asia stocks, the Chinese economic policies will continue to affect Asia Stock markets.
