Share prices down in Asia following interest rate cuts

Published:  13 Jul at 9 AM

A decision by the central bank of South Korea to slash interest rates has resulted in a share price drop across Asia. The shares index of the South Korea Kopsi fell by 2.2 per cent as interest rates were reduced from 3.25 per cent to 3 per cent. The decision has caused analysts to suspect that the economic situation in the country has significantly worsened.

A lack of monetary policy change by the Bank of Japan meant that the Nikkei shed 1.5 per cent. In Hong Kong the Hang Seng dropped by just over 2 per cent and in Sydney the All Ordinaries index was down by 0.7 per cent.

Japan’s central bank acted as expected by maintaining its key interest rate at below 0.1 per cent but failed to expand its programme of asset buying which would be a way of stimulating growth.

The country’s inflation projection has also been reduced from 0.3 per cent to 0.2 per cent and the growth forecast to March has been dropped from 2.3 per cent to 2.2 per cent.

South Korea’s decision to cut interest rates follows similar moves by a number of other central banks. On Wednesday, Brazil lowered its rate along with China’s central bank and the European Central Bank. A statement issued by the Bank of Korea explained that economic growth had been weaker than expected.