* Asia stocks fall on China rate rise, Nikkei down over 2
pct
* Dollar holds gains, commodity prices stabilise
* Some say reaction to China move may be overdone
(Repeats to more subscribers)
By Sugita Katyal
SINGAPORE, Oct 20 (Reuters) - Asian stocks fell on
Wednesday, with Japan's Nikkei average tumbling over 2 percent,
as investors fretted that China may be embarking on a policy
tightening cycle after it surprised with its first interest
rate rise since 2007.
The dollar stabilised, holding most of its gains made the
previous day on the China news, with analysts saying further
gains in the U.S. currency may be limited given expectations
the Federal Reserve will ease policy again as early as next
month.
Commodity prices also steadied after falling sharply on
Tuesday.
The MSCI index of Asia Pacific stocks outside Japan
<.MIAPJ0000PUS> down 0.40 percent at 0325 GMT, after trimming
some of its losses suffered earlier in the day.
"It is not clear whether the central bank will start on a
process of additional rate increases under the pressure of
asset price bubbles and hot money inflows, but this signal
shows that the government is clearly concerned about escalating
inflation and rising real estate prices," said Guo Yanling,
analyst at Shanghai Securities.
Japan's Nikkei average <> slid 2.2 percent with
investors scrambling to take profits on China's unexpected
tightening and after worries about some U.S. banks pushed Wall
Street lower.
It fell to an intraday low of 9,316.97 -- the lowest since
Sept. 15, with resource-related shares and exporters taking a
hit.
"China's rate hike and the sharp fall on Wall Street were
key factors that put a lot of downward pressure on the Nikkei.
It could fall to around 9,200 in the near term," said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley
Securities.
The People's Bank of China, the central bank, said it would
lift its benchmark one-year lending and deposit rate, effective
on Wednesday, in a move some analysts said may suggest Beijing
and Washington are working together to ease global currency
tensions. [] []
Hong Kong's Hang Seng Index <> was down 1 percent, with
property firms taking a severe hit. Property stocks <.HSNP>
fell 1.7 percent after opening 2.4 percent lower while the
Shanghai property sub-index <.SSEP> was down 3.5 percent.
China Vanke <000002.SZ>, the country's largest listed
developer, was down 4.5 percent.
But in a sign that the initial reaction to the rate rise
may have been overdone, Shanghai's key stock index <>
clawed back into positive territory after opening down 1.8
percent.
While a pull-back in riskier assets was due anyway after a
recent heady run-up, China's rate hike also rattled investors
as it sparked concerns the world's growth engine may be
embarking on a policy tightening cycle.
At a time when growth in other major economies is tepid,
many investors look to China to hold up global growth. So some
are worried China may excessively slow its economy if it
tightens too far.
Crude oil prices <CLC1> held steady after falling more than
4 percent on the rate rise, while spot gold <XAU=> also
stabilised at $1,335.50 after sharp falls. []
[]
The yuan <CNY=CFXS> fell in early trade to 6.6588 per
dollar compared with Tuesday's close of 6.6447, after the
People's Bank of China (PBOC) set the currency's mid-point
sharply lower in what was seen as an effort to prevent the
interest rate rise from attracting more inflows of speculative
capital.
(Editing by Kazunori Takada)
