Asian Stocks Advance as Stimulus Hopes Buoy Japanese Shares

  • Hong Kong shares erase 2016 losses to enter bull market
  • Malaysian equities decline amid alleged fraud at state fund

Asian stocks rose toward their highest closing level since November as expectations for a stimulus package lifted Japanese shares and better-than-anticipated corporate earnings in the U.S. eased concerns over global growth. Shares in Hong Kong entered a bull market.

The MSCI Asia Pacific Index gained 0.5 percent to 134.50 as of 4:05 p.m. in Hong Kong. Japan’s Topix index advanced 0.6 percent, resuming a rally after snapping a six-day advance on Wednesday. Japan’s government is considering 20 trillion yen ($187 billion) of stimulus, almost double its previous plan, to counter the possible effects of the U.K.’s decision to leave the European Union, Kyodo News reported, citing people close to the matter. Malaysian shares were the worst performers in the region as alleged fraud at a state investment fund returned to the spotlight.

The Asia Pacific gauge is trading near its highest level of 2016 after almost $5 trillion was added to the value of global shares since the post-Brexit low on June 27, as investors bet central banks and governments will do more to stimulate growth. The Dow Jones Industrial Average capped a ninth straight gain and the S&P 500 Index closed at a record, with technology shares pacing the advance.

“We have better corporate earnings, likely bold fiscal stimulus in Japan, zero interest rates helping to absorb every macro shock we hear about and broad monetary easing,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne. “If equity markets can’t rally in this environment they never will and really the key concern holding back fresh capital is significantly elevated valuations.”

Australia’s S&P/ASX 200 Index rose 0.4 percent. South Korea’s Kospi index and Singapore’s Straits Times Index slipped 0.2 percent. The Shanghai Composite Index rose 0.4 percent and Taiwan’s Taiex Index added 0.5 percent.

Hong Kong’s Hang Seng Index advanced 0.5 percent, erasing its decline for the year and taking its increase from a three-year low in February to 20 percent, the technical definition for a bull market. Real estate companies in Hong Kong, where borrowing costs tend to move in tandem with the U.S., have boosted the equity rally.

Record High

New Zealand’s S&P/NZX 50 Index climbed 0.6 percent to a record high after the country’s central bank said further monetary easing is probably needed to lift inflation, reinforcing expectations of an interest-rate cut next month. The equity gauge has fallen only three days in the past 19 sessions and is the world’s best performing developed-market measure in 2016, up 14 percent this year.

Kyodo reported that a Japanese government stimulus plan will include projects for 2017 and beyond. Prime Minister Shinzo Abe has kept markets guessing on the details of a much-anticipated fiscal package as economy minister Nobuteru Ishihara said he’ll compile measures later this month.

“If it’s actual stimulus and not just smoke and mirrors, it certainly will help,” Shane Oliver, Sydney-based global investment strategist at AMP Capital Investors Ltd., which manages more than $110 billion, told Bloomberg Radio’s First Word Asia. “It certainly would be a huge stimulus program. This is what’s been lacking in Japan over the last few years. There hasn’t been a lot apart from monetary stimulus.”

1MDB Fallout

The FTSE Bursa Malaysia KLCI Index dropped 0.6 percent, the most since June 16. U.S. prosecutors said they plan to seize assets after more than $3.5 billion was misappropriated from 1Malaysia Development Bhd., a state development fund known as 1MDB that was previously headed by Prime Minister Najib Razak. Singapore said it seized S$240 million ($177 million) in assets linked to the alleged fraud.

India’s S&P BSE Sensex fell 0.5 percent after changing direction at least seven times. The gauge is up 22 percent from a low in February as foreign funds added to purchases of local shares amid signs of an improving economy.

Futures on the S&P 500 index were little changed. Microsoft Corp. and Morgan Stanley were among the latest U.S. companies to report earnings that surpassed forecasts in a results season that has delivered more positive surprises than negative ones.

Consumer discretionary and financial stocks were among the best performers in Asia on Thursday ahead of a European Central Bank meeting, with most economists predicting further easing this year. Indonesia’s central bank is forecast to lower interest rates Thursday, following cuts in Malaysia and Turkey since the start of last week, while the Bank of Japan convenes next week.

“Central banks are using the excuse of Brexit to step up stimulus packages,” Mohammed Apabhai, head of Asia trading strategy at Citigroup Inc., told Bloomberg TV in Hong Kong. “The hope of that is the thing that’s really driving people into growth and cyclical names at the moment.”

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