Asian stocks climbed on Tuesday after signs of progress on U.S. budget talks to avert the fiscal cliff, with Japanese shares extending multi-month highs.
Japan’s Nikkei Stock Average advanced 1.2%, building on gains from the previous session, when a landslide election victory for the Liberal Democratic Party (LDP) sparked fresh optimism for the introduction of deflation-fighting policies, sending the stock index to its highest level since April.
Hong Kong’s Hang Seng Index edged up 0.2%, moving back toward highs not seen since August last year.
Elsewhere in Asia, South Korea’s Kospi climbed 0.3%, Singapore’s Straits Times Index also added 0.3%, and Australia’s S&P/ASX 200 index rose 0.8%.
The Shanghai Composite Index reversed early losses to trade up 0.7%.
Asian bourses received help from U.S. share gains Monday after reports of progress in Washington on talks to avoid the fiscal cliff, a package of austerity slated to come into effect at the start of next year which some economists say would tip the U.S. back into recession.
“Investors are likely to respond to the positive tone set by U.S. markets,” said Ric Spooner, chief market analyst at CMC Markets.
“Investors underweight equities are becoming more anxious about being left behind if there is a reasonable outcome to the U.S. fiscal cliff negotiations,” he said.
Late Monday, President Barack Obama reportedly made a new offer on a deal to avoid the cliff, moving closer to the Republicans’ position.
The White House’s latest counterproposal included $1.2 trillion in revenue increases and $1.22 trillion in spending reductions, Reuters reported, citing an unnamed source familiar with the negotiations.
Financials were among the sectors in Tokyo posting strong gains Tuesday, with Nomura Holdings Inc. up 6.9% after a 3.2% rally for its American Depositary Shares overnight, and top Japanese bank Mitsubishi UFJ Financial Group Inc. rising 4.3%.
In the light of current global asset-price reflation and falling volatility, “Japan is our favored contrarian long,” said Merrill Lynch’s global equity strategy team, which recommended buying Japanese banks.
With the dollar trading just below ¥84 on Tuesday, many blue-chip exporters added to their Monday’s gains. Olympus Corp. rose 4%, Sharp Corp. extended its rally Monday to add another 11.3%, and industrial major Kawasaki Heavy Industries Ltd. gained 2.4%.
Tokyo Electric Power Co. zoomed 14.9% higher, also building on strong gains in the previous session, when the stock ended limit-up. Dow Jones Newswires attributed continued buying to expectations for a more favorable policy treatment under the incoming LDP-led government as a reason for the surge.
Hong Kong investors were buying into energy companies, with China Petroleum & Chemical Corp. up 1.6% and Kunlun Energy Co. adding 1.5%.
Consumer-sensitive firms were also advancing, as casino operator Sands China Ltd. rose 1.5%, and telecom China Mobile Ltd. gained 1.2%.
Insurance major AIA Group Ltd. lost 2.1% after former parent American Insurance Group Inc. wrapped up its stake sale in AIA.
Several banks were gaining in mainland Chinese trading, with China Merchants Bank Co. up 2.3% and China Construction Bank Corp. 1.1% higher.
The South Korean market was helped by a 1.8% gain for Korea Exchange Bank , and a 2.3% improvement for Hyundai Steel Co. .
Iron-ore miners and related firms saw some gains in Australia, where Atlas Iron Ltd. rose 4.9%, and Mount Gibson Iron Ltd. advanced 7.4%.
Retailers were also helping support the Sydney market, with supermarket operator Woolworths Ltd. gaining 1.3%, and Wesfarmers Ltd. rising 1.2%.
Marketwatch
