Japanese stocks soared to outperform the rest of Asia on Monday, after weekend election results sparked optimism for new policies to combat deflation.
Japan’s Nikkei Stock Average jumped 1.5%, reaching its best level since April.
While the Shanghai Composite index rose 0.5%, the Hang Seng Index dipped 0.4% in Hong Kong. South Korea’s Kospi lost 0.5% and Australia’s S&P/ASX 200 index slipped 0.1%.
The mild losses for much of Asia followed a downbeat finish in the U.S. on Friday, as investors fixated on the lack of a federal government budget deal and ignored upbeat economic reports in the U.S. and China.
However, Japanese stocks soared on Monday, boosted by a weaker yen, with the dollar buying ¥84.14 on Monday, from ¥83.51 in late North American trading on Friday.
The moves in Japanese asset markets came after a coalition of the Liberal Democratic Party of Japan and junior partner New Komeito took more than two-thirds of the 480 seats on offer in Sunday’s lower house election, according to the Nikkei.
“The LDP’s stronger-than-expected showing raises the likelihood of aggressive fiscal and monetary expansion in anticipation of the July 2013 upper house elections and October’s final value-added-tax hike decision, posing upside risks to our 0.2% year-on-year 2013 gross domestic product forecast,” HSBC economist Izumi Devalier wrote in a note to clients.
With LDP leader Shinzo Abe expected to be named as the country’s new prime minister on Dec. 26, beating deflation in part by boosting public works spending and taking bold monetary easing steps will be the new government’s top priority, the Nikkei reported.
Weakness in the yen had prompted sharp share price gains for many Japanese exporters in the lead-up to the election. Sharp Corp. rose 8.9%, Nissan Motor Co. climbed 2%, Mazda Motor Corp. advanced 2.1% and Sony Corp. gained 2%.
In the Chinese equity markets, Cnooc Ltd. declined 1.8% and China Petroleum & Chemical Corp. lost 1.7% in Hong Kong.
Shares of insurance giant AIA Group Ltd. were in a trading halt at the company’s request, pending the potential sale of “significant proportion” of American International Group Inc.’s 13.69% stake in the company via a placement.
Other insurance companies gained, however, with Ping An Insurance (Group) Co. of China Ltd. up 1.6% and China Life Insurance Co. up 1.3% higher.
Metal-related firms were advancing notably in mainland trading, with Jiangxi Copper Co. up 4.2% and Angang Steel Co. up 1.9%.
Autos lost ground in South Korea on Monday, with Kia Motors Corp. down 4.6% and Hyundai Motor Co. losing 2.6%
Losses for health-care firms weighed down the Australian market, with blood products group CSL Ltd. down 1% and Mesoblast Ltd. off by 2.4%.
Marketwatch
