Asia Stocks Climb on Emerging Rebound as Japan Nears Bull Market

  • Tokyo’s Topix index closes at highest level since February
  • Treasury yields drop, helping trigger developing-nation rally

Rex Shares' King: Be Cautious in Emerging Markets

Asian stocks rose for the first time in four days amid a rebound in emerging-market assets that got battered after the U.S. election. Tokyo shares rallied to near a bull market.

The MSCI Asia Pacific Index climbed 0.5 percent to 134.81 as of 4:01 p.m. in Hong Kong, while Japan’s Topix index jumped 1.3 percent. U.S. bonds halted a selloff on Tuesday and the Dow Jones Industrial Average climbed to a fresh record. Indonesian and Philippine shares led a recovery in Asian developing-nation stocks, with both markets halting a three-day slide, on speculation investors took advantage of a drop in valuations.

Asian equity markets have been whipsawed since Republican Donald Trump’s shock victory on Nov. 8. Emerging-market assets have been hit by expectations for faster U.S. interest-rate increases amid speculation Trump’s spending plans will boost inflation. Meanwhile, Japanese shares have rallied and volumes surged as the yen slumped and investors bet earnings at financial companies will benefit from higher borrowing costs.

“Things might have got a little bit overdone with the market having got very excited about reflation and what it’s going to mean,” said Mark Lister, head of private wealth research at Craigs Investment Partners in Wellington, which manages about $7.2 billion. “Most of the sharp adjustment is behind us now and from here you’ll need to see tangible evidence of some of those policy moves.”

Japan’s Topix has climbed for five straight days, rallying almost 19 percent from its low of the year reached on Feb. 12 and putting it on the brink of a bull market. After hitting a near three-year high against the dollar in August, the yen has been pulling back, allowing investors to regain appetite for Japanese equities that are heavily reliant on export earnings.

Banks drove the latest Tokyo rally, with a gauge tracking lenders climbing 5.1 percent on Wednesday. Mitsubishi UFJ Financial Group Inc., the country’s largest bank, jumped 6.2 percent. Banking stocks have been resurgent, riding on a global rebound in bond yields that has seen lenders return to levels touched before the Bank of Japan’s unprecedented move to adopt negative interest rates in January.

The Jakarta Composite Index jumped 1.8 percent, recouping some of its 6.8 percent loss over the past three days. Investors are starting to buy Indonesian stocks as valuations are now at a more reasonable level, said John Teja, a director at PT Ciptadana Sekuritas in Jakarta. The Philippine Stock Exchange Index rose 1.6 percent.

New Zealand’s S&P/NZX 50 Index gained 0.8 percent and Australia’s S&P/ASX 200 Index was little changed. Singapore’s Straits Times Index added 0.3 percent and Taiwan’s Taiex Index climbed 0.4 percent. India’s S&P BSE Sensex Index advanced 0.7 percent. Hong Kong’s Hang Seng Index closed little changed and the Shanghai Composite Index declined 0.1 percent.

The Kospi index advanced 0.6 percent. South Korea’s government will strengthen monitoring of financial markets and the economy and take any stabilization measures that are needed amid rising external and internal uncertainties, Finance Minister Yoo Il-ho said Wednesday.

Fed, Oil

As market volatility eases, attention is increasingly turning toward the outlook for U.S. monetary policy. Daniel Tarullo, a member of the Federal Reserve’s board of governors, said Tuesday an interest-rate increase next month is more likely than before and futures contracts imply a 94 percent probability of that happening. Fed Presidents James Bullard, Neel Kashkari and Patrick Harker are all scheduled to speak Wednesday and may shed more light on the likely trajectory of borrowing costs.

Energy producers climbed after OPEC members were said to be making a final diplomatic push toward securing a deal to cut output. Oil rose 0.3 percent after surging 5.7 percent on Tuesday. Qatar, Algeria and Venezuela are leading the effort to finalize an agreement, a delegate familiar with the talks said.

Futures on the S&P 500 Index fell 0.1 percent after the underlying gauge climbed 0.8 percent on Tuesday.

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