Asian Stocks Rise a Fourth Day After BOJ Adjusts Monetary Policy

  • Japan’s Topix surges to highest since June as lenders rally
  • Attention now turns to Federal Reserve review later Wednesday

Asian stocks rose for a fourth day after tweaks to the Bank of Japan’s monetary policy spurred a surge in the nation’s shares and preserved investment flows to regional markets.

The MSCI Asia Pacific Index climbed 1.4 percent to 140.65 as of 4:01 p.m. in Hong Kong, taking its rally since Sept. 15 to 3 percent. Japan’s Topix index jumped 2.7 percent to the highest close since June 1 as the yen weakened 0.1 percent to 101.78 a dollar. The BOJ kept its policy rate at minus 0.1 percent and said the monetary base target, which previously had been set at annual increases of 80 trillion yen ($786 billion), may now fluctuate in the short term as policy makers seek to control the yield curve.

“We’re seeing a knee-jerk reaction to the BOJ decision but this could reverse depending on what we get tonight from the Fed,” said Nicholas Teo, a trading strategist at KGI Fraser Securities in Singapore. “It seems the BOJ didn’t go full force in its move to further ease monetary policy. Its a very safe move, choosing to reserve some of their bullets as they wait for the Fed’s next moves.”

For the main story on the BOJ’s policy changes, click here

Attention now turns to the U.S. central bank’s review later on Wednesday, with futures traders seeing a 22 percent chance of an interest-rate increase. Global markets have oscillated amid an uptick in volatility the past two weeks, with concern mounting that monetary authorities are becoming less committed to stimulus amid persistently mixed economic data. A report Tuesday showed U.S. new-home construction fell more than projected in August, representing a pause after a spell of strong gains.

“With U.S. data pretty mixed at the moment, there’s a lack of consensus among Fed policy makers whether to raise rates,” said Chris Green, the Auckland-based director of economics and strategy at First NZ Capital Group Ltd. “The focus of investors will be on the tone of the Fed statement.”

Australia’s S&P/ASX 200 Index increased 0.7 percent, as did Taiwan’s benchmark gauge. Hong Kong’s Hang Seng Index and the Jakarta Composite Index advanced 0.6 percent, Thailand’s SET Index added 1.3 percent and South Korea’s Kospi index rose 0.5 percent. The Shanghai Composite Index closed up 0.1 percent, as did Singapore’s Straits Times Index. New Zealand’s S&P/NZX 50 Index declined 0.4 percent.

Mitsubishi UFJ Financial Group Inc. jumped 7.4 percent in Tokyo, pacing gains among Japanese lenders after the central bank decided to target the bond yield curve and refrain from deepening negative interest rates, easing concern that monetary policy will continue to erode their profits.

‘Relief Rally’

“We’re seeing a relief rally since the BOJ decided not to immediately cut rates further,” said Khiem Do, the head of multi-asset strategy at Baring Asset Management (Asia) Ltd. in Hong Kong. “That’s why the Japanese banks are rallying. Its seems there’s domestic political pressure for the BOJ not to hurt the banks’ profits anymore.”

HTC Corp. surged 6 percent in Taipei amid speculation new smartphone models will boost earnings. China State Construction International Holdings Ltd. advanced 9.2 percent in Hong Kong after Goldman Sachs Group Inc. added the stock to its conviction buy list as the construction of infrastructure projects starts. Kingsoft Corp. climbed 7.7 percent in Hong Kong as a new mobile game developed by the Chinese software maker became a hit among Android smartphone users.

Futures on the S&P 500 Index increased 0.4 percent. The U.S. equity benchmark index was little changed on Tuesday, erasing an earlier gain of as much as 0.6 percent.

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