Asia Stocks Set for Best Month Since October on Fed Optimism

  • Evans reinforces Yellen's message with inflation comments
  • Hang Seng China Enterprises Index Enters Bull Market

Asian stocks headed for the biggest monthly gain since October as optimism the Federal Reserve is in no hurry to lift U.S. interest rates and signs that China’s economy is stabilizing spurred appetite for riskier assets.

The MSCI Asia Pacific Index is up 8.2 percent this month, approaching its 200-day moving average and trimming losses this quarter to 2.1 percent. The gauge added 0.1 percent to 128.92 as of 5:39 p.m. in Tokyo. The Shanghai Composite Index had its steepest monthly gain in almost a year and Hong Kong’s Hang Seng China Enterprises Index entered a bull market. Japan’s Topix index capped its worst quarter since September.

A tumultuous period for global markets since the start of the year initially focused on Chinese growth concerns and the tumbling price of oil. The selloff then spread to banking shares amid concern over negative interest rates. Equities have since rebounded after the Fed reassured investors that it won’t rush to increase borrowing costs. The world’s second-biggest economy is showing signs of stabilizing, Chinese Premier Li Keqiang said last week.

“A lot of the recent rebound has been down to the Fed back-tracking on rate hikes,” Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion, said by phone. “We’ve seen a big rally but there are still some genuine worries out there. Markets had been overpricing some of the risks, whereas now they’re probably underpricing them.”

Jobs, Evans

While private American jobs data came in better than analysts expected, Fed Chair Janet Yellen’s dovish message from Tuesday continued to reverberate. Chicago Fed President Charles Evans signaled the central bank would tolerate above-target inflation for a “brief period” amid threats to American expansion from a slowing global economy. Futures now show no chance of the Fed altering monetary policy next month and only 45 percent odds of a rate increase by November.

Policy makers have emphasized that progress in economic data will steer their rate decisions. A report Wednesday showed companies in the U.S. added 200,000 workers to their payrolls in March, slightly above the forecast of economists surveyed by Bloomberg. The government’s monthly jobs report due Friday is predicted to show a 205,000 gain with the unemployment rate holding at 4.9 percent. A measure of manufacturing activity is also due Friday.

Growth Signals

The Shanghai Composite added 0.1 percent, extending the March gain to 12 percent. A report last weekend showed industrial profits halted declines to surge 4.8 percent in the first two months of the year, while manufacturing data on Friday will probably show improvement. The Purchasing Managers’ Index rebounded to 49.4 percent in February from 49 a month earlier, according to the median estimates of a survey by Bloomberg.

MSCI Inc. said China’s inclusion in global benchmark stock indexes will rest on whether authorities are prepared to prevent a repeat of the trading halts that closed down half the market amid last year’s $5 trillion rout.

Investors remain concerned about liquidity risks, the index provider said in a statement announcing a fresh round of discussions on whether to add mainland equities to its emerging-markets gauge. A decision is due in June.

The Hang Seng China Enterprises gauge of mainland shares traded in Hong Kong rose 0.3 percent at the close, extending its gain since a Feb. 12 low to 20 percent, a level which some traders define as a bull market. The Hang Seng Index slid 0.1 percent.

Australia’s S&P/ASX 200 Index added 1.4 percent. New Zealand’s NZX 50 Index gained 0.6 percent to close at a record high. South Korea’s Kospi index lost 0.3 percent. Singapore’s Straits Times Index declined 1 percent, trimming a 7.7 percent monthly rally.

Futures on the Standard & Poor’s 500 Index were down 0.2 percent following a 0.4 percent advance in the U.S. benchmark gauge on Wednesday as it closed at the highest since Dec. 29.

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