Asian Stocks Edge Higher After Global Selloff on Brexit Angst

  • Topix advances first time in five days as yen weakens
  • China shares rally after MSCI, spurring talk of intervention

Asian stocks climbed as Shanghai shares rallied, snapping the biggest four-day decline since February that was spurred by concerns over the U.K. leaving the European Union.

The MSCI Asia Pacific Index rose 0.1 percent to 126.66 as of 4:15 p.m. in Hong Kong, wiping out an earlier loss. The gauge sank 4.4 percent in the past four days as new polls indicated more Britons favor leaving the EU than want to remain. Japan’s Topix index gained for the first time in five days as the yen slid. The Shanghai Composite Index rallied the most in two weeks, sparking speculation that state-backed funds may be supporting the market after MSCI Inc. refused to add the nation’s domestic equities to benchmark indexes.

“While we get a bounce following the huge knockdown across markets, investors should probably sell into the strength ahead of the Brexit vote,” Nicholas Teo, a trading strategist at KGI Fraser Securities Pte. in Singapore, said by phone. “There’s a lot of uncertainties out there. A statement from the Fed tonight may help calm the market, but concerns remain on the timing of the rate hike.”

The Federal Reserve is ending a two-day meeting Wednesday, with traders seeing zero chance that policy makers will raise interest rates and a 16 percent probability of a tightening in the next meeting in July. The Bank of Japan will announce its policy decision on Thursday.

China Intervention

China’s Shanghai Composite Index advanced 1.6 percent, reversing declines of as much as 1.1 percent and capping it’s biggest gain since May 31.

“It’s a sharp reversal so there has to be some government intervention,” said
Francis Lun, chief executive officer at Geo Securities Ltd. in Hong Kong. “The Chinese government never wants to see the market falling too much.”

In a setback for President Xi Jinping’s efforts to raise the profile of mainland markets and turn the yuan into an international currency, MSCI said China needs additional improvements in the accessibility of the A-shares market before they can be included in its indexes.

China’s inclusion was rejected despite a flurry of measures this year to address MSCI’s concerns, including curbs on arbitrary trading halts and looser restrictions on cross-border capital flows. MSCI, whose emerging-market index is tracked by investors with $1.5 trillion in assets, said it will reconsider inclusion in its 2017 market classification review, while not ruling out an earlier announcement.

Pakistan Rally

Pakistan’s benchmark stock index jumped 2.6 percent, the most since March 2015 after MSCI said it will include the nation’s equities in its benchmark emerging-market index for the first time since 2008. Asia’s best-performing share market of 2016 could attract about $220 million of inflows, JPMorgan Chase & Co. said in a note following MSCI’s decision.

Japan’s Topix index climbed 0.4 percent, reversing earlier losses of as much as 0.6 percent, as the yen weakened to 106.24 after appreciating in the past three days. Hong Kong’s Hang Seng Index rose 0.4 percent. Indian equities increased 0.9 percent and New Zealand’s S&P/NZX 50 Index gained 0.5 percent. Australia’s S&P/ASX 200 Index dropped 1.1 percent. South Korea’s Kospi index slipped 0.2 percent. Singapore’s Straits Times Index lost 0.3 percent.

Toshiba Corp. surged 7.6 percent in Tokyo after CLSA Ltd. raised its rating on the electronics manufacturer on an improved outlook for earnings. Tsuhura Holdings Inc. jumped 8.4 percent to a record after the operator of drug stores posted full-year operating profit that beat analyst estimates. PT Hanjaya Mandala Sampoerna Tbk fell 4.6 percent in Jakarta, pacing losses among cigarette makers after Indonesia announced plans to restrict smoking in public places.

Futures on the S&P 500 Index added 0.1 percent. The U.S. equity benchmark index fell 0.2 percent on Tuesday, extending losses for fourth day, the longest losing streak since February.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE