* Asian shares stabilise for now
* Investors look to Turkey c. bank policy meeting
* Markets worry Fed tapering may undermine emerging markets
* China slowdown another concern
* Indian central bank surprises with rate hike, rupee steady
By Hideyuki Sano
TOKYO, Jan 28 Asian shares were pinned near
five-month lows on Tuesday as concerns that slower growth in
China and reduced U.S. monetary stimulus could hurt some
emerging economies dependent on exports and foreign capital.
Investors are now focusing on whether the central bank of
Turkey, one of the epicentres of the latest rout in emerging
markets, could salvage the lira at an emergency policy meeting
later in the day, after India surprised markets by raising
European shares are seen steady to slightly higher with
German DAX seen rising 0.1 percent and French shares
seen gaining as much as 0.3 percent.
"I do not necessarily think the world economy will be
severely damaged by the latest troubles in emerging economies,
but markets are getting nervous," said Ayako Sera, senior market
economist at Sumitomo Mitsui Trust Bank.
MSCI's broadest index of Asia-Pacific shares outside Japan
briefly dipped to a five-month low, extending a
3.8 percent loss in the past three days before recouping the
losses to trade almost flat.
Japan's Nikkei average rose 0.2 percent though it
briefly fell to a 2 1/2-month low.
Investors drew some comfort from the news that a Chinese
trust firm had reached an agreement to resolve a troubled
high-yield investment product, just days away from what could
have been a precedent-setting default in China's shadow banking
While the agreement alleviated fears that an immediate
default could spark a run on similar products, concerns over the
rapid expansion of China's shadow banking sector, a key source
of financing for local corporations, could fester.
"The deal to avert default is a source of relief for many,
but it's a clear warning on the scale of the risks that still
remain with other trust products due to mature this year," said
Jackson Wong, Tanrich Securities' vice-president for equity
sales in Hong Kong.
A contraction of demand in China, the world's second largest
economy, has repercussions for many emerging economies that have
boomed on exports to China, including countries as far as Brazil
The Turkish lira remained volatile, trading at
2.2690 to the dollar, though it kept some distance from the
record low of 2.3900 hit on Monday.
The lira, which has been battered by the corruption scandal
that rocked Prime Minister Tayyip Erdogan's government,
rebounded from a record low after the central bank called an
emergency meeting on Tuesday.
The central bank is expected to raise rates to defend the
sagging lira after its decision not to do so last week sent the
currency into freefall. Its statement is due at 2200 GMT,
midnight in Turkey.
"The market is expecting a rate hike of one percent or more
and possible capital controls. Whether their steps can calm
markets is one big area of focus," said Masafumi Yamamoto, chief
strategist at Praevidentia Strategy.
Higher interest rates tend to help attract foreign capital,
prompting some countries, including Brazil and India, to raise
rates last year.
India's central bank surprised markets by raising rates
again on Tuesday, though the Indian rupee showed a limited
reaction, trading at 63.05 rupee to the dollar.
Although it had fallen in the past couple of days in
sympathy with other emerging currencies, it has kept some
distance from a record low of 68.85 to the dollar hit in August.
Still, expectations that the U.S. Federal Reserve will scale
back its bond buying further have put pressure on risk assets,
especially emerging markets dependent on external financing. The
Fed starts its two-day policy meeting later in the day.
Many expect the Fed to reduce its monthly bond purchase by
$10 billion as it did in December, although some players
speculate the latest turmoil in emerging markets could make the
Fed more cautious.
Major currencies marked time ahead of the Fed's policy
meeting, with both the euro and the yen little-changed at
$1.3676 and 102.69 yen to the dollar respectively.
Disappointing guidance from Apple Inc hit the
shares of its suppliers across Asia.
Apple missed Wall Street's target for iPhone sales over the
crucial holiday shopping season and offered a
weaker-than-expected forecast for this quarter, sending its
shares down sharply after the bell.