Asia Stocks Rebound as U.S. Rate Bets Give Boost to Japan Shares

  • Taiwan Taiex Index climbs as first female president takes over
  • Chinese shares listed in Hong Kong gain after valuations drop

Asian stocks rebounded from a six-week low as Japanese shares climbed after the yen weakened and investors snapped up beaten down Chinese equities traded in Hong Kong.

The MSCI Asia Pacific Index added 0.3 percent to 125.76 as of 4:11 p.m. in Hong Kong, after earlier falling as much as 0.2 percent. The measure was little changed for the week after three weeks of losses.

Some $900 billion was wiped off the value of global shares over the last three days as traders stepped up bets on a June interest rate increase in the U.S., spurred by comments from Fed officials, minutes of the last policy meeting and quickening inflation. While the American economy shows signs of being able to weather higher borrowing costs, the outlook for global growth has been worsening and finance chiefs from the Group of Seven nations are meeting in Japan May 20-21 to discuss ways to tackle this.

“Everyone just has to bite the bullet and realize that rates have to go up,” said James Audiss, Sydney-based senior investment adviser at Shaw and Partners, which manages about A$10 billion ($7.2 billion). “Earnings are coming out OK, forward guidance wasn’t too bad and the U.S. economy is doing better. That’s all supportive for the market.”

MSCI Asia Pacific index reached its 2016 peak on April 21.
MSCI Asia Pacific index reached its 2016 peak on April 21.

It’s been a tumultuous year for investors in Asia-Pacific equities. The regional index began the year with a 14 percent slump through a February low on concern a devaluation of the Chinese yuan would curb global growth and amid prospects for a U.S. rate increase. It then rallied almost 20 percent through this year’s peak in April before retreating again.

Some Fed policy makers expressed concern that markets were ill-prepared for a rate increase next month, minutes of the central bank’s April meeting showed this week. The document also indicated policy makers’ willingness to raise interest rates in June if the economy continues to improve. New York Fed President William Dudley said Thursday the central bank is moving closer to raising rates at one of its next two meetings and the fact this message is getting through to financial markets is welcome news.

Japan’s Topix index rose 0.5 percent, bringing its gain for the week to 1.8 percent. The index closed at the highest level since April 27, as investors anticipated a potential U.S. rate increase in June would lead to a weaker yen, aiding profits at exporters.

Australia’s S&P/ASX 200 Index climbed 0.5 percent with volume down 18 percent. New Zealand’s S&P/NZX 50 Index added 0.1 percent. South Korea’s Kospi index was little changed. Singapore’s Straits Times Index added 0.9 percent.

Taiwan’s Taiex Index rose 0.4 percent. Tsai Ing-wen became Taiwan’s first female president on Friday. Tsai said she will seek peaceful ties with China while resisting pressure from Beijing to acknowledge the idea that they are part of a single nation.

The Hang Seng China Enterprises Index rose 0.7 percent to erase a weekly loss, with financial, energy and material shares in the lead, as investors took advantage of recent declines to add to their holdings. The H-shares gauge has plunged 7 percent so far this month, the most in Asia, pushing technical indicators toward oversold levels this week. The Shanghai Composite rose 0.7 percent, while Hong Kong’s Hang Seng Index gained 0.8 percent.

“The rebound in Hong Kong is being driven mainly by battered valuations,” said Ronald Wan, chief executive at Partners Capital International in Hong Kong.

Oil Deal

Friday morning kicked off with deal activity in Australia. Papua New Guinea oil and gas producer Oil Search Ltd. agreed to buy InterOil Corp. in a deal valuing the explorer around $2.2 billion. Interoil surged 31 percent in after-hours U.S. trading. Oil Search slid 1.2 percent, after earlier rising as much as 5.5 percent.

Oil headed for a second weekly advance while copper prices led base metals higher, boosting energy producers and raw-material producers in the Asia-Pacific region. BHP Billiton Ltd., the world’s largest mining company, added 0.8 percent in Sydney, while Rio Tinto Group gained 1.7 percent.

E-mini futures on the S&P 500 added 0.3 percent. The underlying gauge lost 0.4 percent Thursday, closing at a seven-week low.

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