Fed Stock Rally Spreads From U.S. to Asia; China Leads Gains

  • Asian equity markets rise after Fed raises lending rate
  • Japan stocks erased losses after BOJ monetary policy decision

Yellen's Rate Hike Press Conference in Two Minutes

The rally in stocks continued in Asia after the U.S. Federal Reserve cast a dovish tone on future rate hikes and said the world’s largest economy is “doing well.” Shares in Hong Kong and mainland China rallied as the People’s Bank of China also raised borrowing costs.

Equity benchmarks from Singapore to South Korea rose as the Fed said it was sticking with plans to raise rates gradually. Japanese stocks erased losses and the yen halted a two-day advance after the Bank of Japan kept policy unchanged, as expected by all economists in a survey. Chinese equities jumped as China’s central bank followed in the footsteps of the Fed.

The MSCI Asia Pacific Index rose the most in two months to a level last seen in June 2015. Materials and energy stocks such as Australia’s Santos Ltd. and South Korea’s Posco led the advance as oil extended gains above $49 a barrel. In New York, the S&P 500 Index rose the most in two weeks and closed near a record.

“We are not surprised about the positive reaction of Asian equity and currency markets to the Fed’s decision,” Khiem Do, head of multi-asset strategy at Baring Asset Management in Hong Kong. “China market’s strong performance can be attributed to the strong recovery in its old industries and also the re-structuring effort by the government in reducing capacity. The China market has become one of the leaders, year-to-date.”

A stable economy and factory reflation allowed the Chinese central bank to follow the Fed in raising borrowing costs. That came after Fed Chair Janet Yellen’s commented on the American economy: “The simple message is the economy’s doing well. We have confidence in the robustness of the economy and its resilience to shocks.”

India’s Sensex climbed back toward highest close since January 2015 as the Fed’s dovish stance was seen positive for emerging-market flows. Shares in Jakarta also advanced to two-year high.

Summary

  • Topix +0.1%, Nikkei +0.1% at close
    • Sharp +6.6%, Calbee -3.7% after China TV claims of mislabeling; Dai-ichi Life -3.9%, after Mizuho sees growth slowdown; Toshiba -3.1%
    • Bank of Japan Governor Haruhiko Kuroda said he has no plan to raise rates just because inflation rate hits 1 percent.
  • Hang Seng +2.1%, Shanghai Composite +0.8%, HSCEI +2.5%, Taiex +1%
    • HengTen Networks +6.6%, Huaneng Power +5.4%, China Unicom +5% on capex guidance
  • S&P/ASX 200 +0.2, NZX 50 +0.3%
    • Santos +5.4%
  • Kospi index +0.8%
    • Hyundai Heavy +6.6% on spinoff plan; brokerages rise amid expectations of higher trading volume
  • Straits Times Index +0.9%, KLCI +1%, Jakarta Composite +1.1%, Philippine’s PSEi +0.3%
  • Sensex +0.5%
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