Asian Stocks Erase Losses as Japan Shares Gain on Stimulus Bets

Updated on
  • South Korea’s Kospi rises 0.5% on government support package
  • Volumes higher than average across Hong Kong, Australia, Japan

Asia Steps Up to Brexit Threat

Asian stocks erased losses and most Tokyo shares rose amid speculation policy makers will move to shore up financial markets after Britain’s vote to leave the European Union.

The MSCI Asia Pacific Index was little changed as of 4 p.m. in Tokyo after being down as much as 1.2 percent earlier. Most Japanese shares rose after a drop in the Nikkei 225 Stock Average below 15,000 spurred buying. South Korea’s Kospi index rose 0.5 percent, reversing a decline of 1 percent.

Investors are watching closely for signs that central banks and governments will help to ease the post-Brexit market turmoil. Japan’s Prime Minister Shinzo Abe said he wants his finance minister and the central bank governor to watch markets more closely. Toshihiro Nikai, chairman of the ruling party’s general council, proposed a 20 trillion yen ($196 billion) package to Abe, the Nikkei newspaper reported. South Korea said it’s planning a fiscal stimulus package of more than 20 trillion won ($17 billion).

“We are probably going to have looser policy settings than before the vote,” said Tim Schroeders, a Melbourne-based portfolio manager at Pengana Capital Ltd., who helps oversee about $1.2 billion in assets. “You’d have to suspect that the bias is to the downside for global growth and as a result that stimulus remains in light of increased uncertainty.”

Asian stocks rebounded Monday from the steepest slump since August amid speculation that policy makers will step in. Traders are grappling with a likely slowdown in global growth and the absence of a clearly defined path and timeline for Britain to leave the EU. Almost $4 trillion has been wiped from the value of global shares since the vote on Thursday.

Japan’s Topix index closed 0.1 percent lower after being down as much as 2.2 percent, with 993 stocks advancing against 836 declining. The gauge is heading for its worst monthly loss since October 2008, and its first back-to-back quarterly decline since 2012. Brexit has boosted an already strengthening yen, dealing a blow to the Bank of Japan’s reflation strategy.

‘Terrible Outcome’

Japan’s benchmark bond yields all dropped below 0.1 percent for the first time as the U.K. decision makes the Federal Reserve less likely to raise interest rates. The probability the U.S. central bank will lift borrowing costs this year fell to 7.7 percent from more than 40 percent before the vote, futures contracts indicate.

Former Fed Chairman Alan Greenspan called Brexit a “terrible outcome in all respects,” in an interview with Bloomberg Surveillance on Monday in Washington.

Australia’s S&P/ASX 200 Index dropped 0.7 percent, New Zealand’s S&P/NZX 50 Index added 0.4 percent and Singapore’s Straits Times Index climbed 1.3 percent.

South Korea’s fiscal stimulus package will include an extra budget of about 10 trillion won that will mainly be used to create jobs and support regions that will be hurt by corporate restructuring, the government said.

Futures on the S&P 500 Index climbed 0.9 percent, following a 1.8 percent slide in the underlying gauge on Monday.