Asian equity markets have rebound, following the Fed’s decision on Friday to cut the discount rate by 50 basis points. On Monday, Japan’s Nikkei share index closed 3% up, Hong Kong’s Hang Seng index rebound 3.6%, South Korea’s Composite Stock Price Index closed 5.7% higher and India's benchmark share index opened 2.6% higher today (Monday). The recent market turmoil has been triggered by a wave of mortgage defaults in the US and equities have been particularly affected on fears that there may be a wider crisis in the financial system due to the liabilities of banks linked to US sub-prime mortgage sector. On Friday, BNP Paribas said it will be able to manage the crisis, following last week’s decision to freeze $2.2 billion worth of funds.
Voters in Thailand approved a new military-backed constitution, paving the way for fresh elections before the end of the year. The constitution is designed to curb executive power, following corruption charges against the former prime minister Thaksin Shinawatra, who was ousted after a coup d’etat last year. The army abandoned the 1997 constitution and is in favour of a ‘managed democracy’. The new system will prevent a strong, one-party government and entrench the power of the bureaucracy and the military. 58% of voters approved the referendum. (For more coverage on how the political instability has affected the economy, please click here)
China will allow investors to buy Hong Kong-traded stocks after opening foreign-currency accounts at Bank of China Ltd, the country’s currency regulator has announced. At present, individuals are limited to purchasing $50,000 dollars in foreign-exchange. This step will expand the investment options for households that currently have 17 trillion yuan ($2.24 trillion) in savings, allowing the country’s foreign-exchange reserves to flow more freely. Currently, only qualified institutional investors are allowed to buy abroad through licensed funds under the QDII program. This move is a further to step towards China’s gradual process of liberalising its capital account.
The pro-presidential Nur-Otan (Fatherland) party of Kazakhstan won an overwhelming victory in the country’s parliamentary elections, receiving 88% of votes. No other party won the minimum 7% necessary to gain seats in parliament. The main opposition party won 3.35% and alleges electoral violations and media bias. Analysts say there is little chance of any protests as president Nazarbayev receives high levels of support. He is seeking to transform the country into a managed democracy, without weakening his grip on power. (For coverage on the country’s surging economic growth, please click here)