Japanese stocks surged again Wednesday, sending the benchmark Nikkei Stock Average back over the 10,000-point mark for the first time since early April, while the rest of Asia also gained ground.
The Nikkei Stock Average rose 2.4% to end at a session-high, bringing week-to-date gains to 4.3% and year-to-date gains to a whisker shy of 21%.
Elsewhere in Asia, Hong Kong’s Hang Seng Index , rose 0.7%, while the Shanghai Composite Index edged down 0.2%.
Australia’s S&P/ASX 200 index , extended near-17-month highs by rising 0.5%. New Zealand’s NZX 50 climbed 1.2%, while Singapore’s Straits Times Index and Taiwan’s Taiex each added 0.2%.
The South Korean market was closed for the country’s presidential election.
Asian equities got a boost after U.S. stocks ended Tuesday’s session with strong gains, with investors taking heart from fresh signs of progress on a compromise solution to avert the fiscal cliff of tax hikes and spending cuts due to take place next year.
“What is important and what is driving the market higher is that the two [main U.S. political] parties are now in constructive discussions over specific tax levels and spending programs and working towards a common middle ground,” said IG Markets strategist Cameron Peacock.
Banks were gaining around the region. In Hong Kong, shares of heavyweight HSBC Holdings PLC added 0.8%, and China Construction Bank Corp. rose 1.1%.
Japanese financials were also notable gainers, with Mitsubishi UFJ Financial Group Inc. soaring 6.1%, Nomura Holdings Inc. surging 4.7%, Daiwa Securities Group Inc. climbing 3.5%, and Resona Holdings Inc. up 3.1%.
Deutsche Bank upgraded the sector to overweight from marketweight, citing expected yield-curve movements after Sunday’s leadership election, which saw the opposition Liberal Democratic Party sweep to a landslide victory.
“Japanese government bond (JGB) yield-market participants generally foresee a decline in yields in the short term from monetary-easing expectations, but a gradual rise thereafter on an increase in JGB issuance. A slow steepening in the yield curve would be positive for bank shares,’ the Deutsche Bank analysts said.
Similarly, expectations of policy moves to bring an end to deflation will likely send risk premiums lower and very long-term interest rates higher, which should be “basically positive for insurance stocks,” the analysts said. The Bank of Japan is due to hold a policy meeting on Thursday.
Among Japanese insurers Wednesday, Tokio Marine Holdings Inc. climbed 4.9%, MS&AD Insurance Group Holdings Inc. rose 7.1%, NKSJ Holdings advanced 6% and T&D Holdings Inc. climbed 4.7%.
Exporters were also strong in Tokyo as the dollar traded at 84.35 yen, up from ¥84.20 in late North American trading on Tuesday, when it reached its highest level since April 2011.
Commonwealth Bank strategists lifted their dollar/yen end-2013 forecast to ¥98 from ¥83 on Wednesday.
“The sharp contraction in Japan’s current-account surplus is the major reason we expect the yen to weaken substantially further in 2013,” they said.
In the auto sector, Honda Motor Co. climbed 5.1%, and Nissan Motor Co. advanced 4.9%.
Toyota Motor Corp. rose 3.5% after a report in the Nikkei business daily that the firm plans to keep its global production at the current record high of about 9.9 million vehicles.
“On balance, we believe the 2013 plan for production to be flat year-on-year is realistic,” said analysts at Goldman Sachs.
On the downside in Asia, Esprit Holdings Ltd. tumbled 5.5% in Hong Kong after issuing a profit warning, saying that it expects a loss in the first half of fiscal 2013.
Nomura cut its stance on stock to reduce after the warning, saying: “We believe the announcement has added further uncertainty to brand momentum and positioning, and creates more doubt around the Esprit story.”
Surfwear retailer Billabong International Ltd. fell 13.3% in Australia as it resumed trading after reportedly receiving a fresh takeover bid Monday worth 526.8 million Australian dollars ($555.2 million). The new bid appeared to value the firm at less than previous offers from TPG and Bain Capital.
However, the Australian benchmark index overall managed to notch its seventh day of gains in nine.
Notable climbers included energy companies, with Linc Energy Ltd. up 4.9%. Whitehaven Coal Ltd. jumped 8.1% after a report that Chinese coal firm China Shenhua Energy Co. approached the firm about buying some assets but was told to make a full takeover bid.
China Shenhua shares rose 3.1% in Hong Kong.
South Korea shares were due to resume trading Thursday after the election, in which the leading contenders were conservative Park Guen-hye and liberal Moon Jae-in. The most recent national polls indicated it would be a close call as to whether Park or Moon came to power, according to The Wall Street Journal
“Park’s victory will be seen as a continuity to existing regulations and a more smooth operation in the administration,” said strategists at Crédit Agricole.
“On the other hand, if Moon wins, we expect lower spot U.S. dollar/Korean won and slightly higher mid- to long-end Korean treasury-bond yields in response, because he is less opposed to a strong won and thinks a weak won is benefitting large exporters only,” they said.
But “overall, the reaction is likely to be muted,” they said.
Marketwatch
