(Bloomberg) -- Asian equities advanced for a second session following Monday’s global rout, after the Bank of Japan said it won’t raise interest rates if financial markets are unstable.
The MSCI Asia Pacific Index climbed as much as 2.1%. Japan’s Topix index pared earlier gains to close 2.3% higher as Bank of Japan Deputy Governor Shinichi Uchida noted the recent volatility in the nation’s markets and said its rate path will shift if there’s an impact on the policy outlook. Benchmarks in South Korea and Taiwan also climbed, with the Taiex index logging its biggest single-day rally since May 2021.
Technology stocks led gains across the region as concerns about further unwinding of the yen carry trade eased, with the Japanese currency weakening more than 2% against the dollar. Still, some market watchers remained cautious.
Uchida’s comments “can bring some stability to the Japanese equity market for now, but it can’t take the focus away from US recession concerns,” said Charu Chanana, head of currency strategy at Saxo Markets. “Putting in fresh carry trades remains tough in this environment of higher volatility and nervousness about the US economy.”
Equities tumbled globally on Monday after a weak US jobs report fueled worries that the Federal Reserve’s interest-rate policy was risking a deeper economic slowdown, while higher borrowing costs from the BOJ spurred an reversing of carry trades after the yen rallied. Investors will be closely watching US initial jobless claims, scheduled for release on Aug. 8 in Asian hours.
Sectors to Watch
- Shares related to China’s electricity grid tech advance as the nation plans to build a new power system to increase the supply of electricity generated through renewable energy.
- Chinese computing stocks gain as the nation vows to better coordinate the planning of computing and electric power infrastructure construction.
- Chinese satellite navigation stocks rise after the government asks SOEs in the navigation and other sectors to buy more domestic products.
Markets at a Glance
- MSCI Asia Pacific Index gains 1.4%
- Japan’s Topix Index rose 2.3%; Japan’s Nikkei Index rose 1.2%
- China’s CSI 300 Index was little changed; Hong Kong’s Hang Seng Index rose 1.4%; Hong Kong’s Hang Seng China Enterprises Index rose 1.4%
- Taiwan’s Taiex Index rose 3.9%
- South Korea’s Kospi Index rose 1.8%; South Korea’s Kospi 200 Index rose 2.2%
- Australia’s S&P/ASX 200 Index rose 0.2%; New Zealand’s S&P/NZX 50 Gross Index rose 0.7%
- India’s NSE Nifty 50 Index rises 1.1%
- Singapore’s Straits Times Index climbs 1.6%; Malaysia’s KLCI Index rose 1.1%; Philippines’s PSEi Index rose 1.6%; Indonesia’s JCI Index rose 1.2%; Thailand’s SET Index rose 1.1%; Vietnam’s VN Index rose 0.5%
- 10-year Treasury yield gains 3.4 basis points
- Bloomberg Dollar Index rises 0.1%
- West Texas Intermediate crude gains 0.4% to $73 a barrel
- Euro falls 0.2%
Here Are the Most Notable Movers
- New Oriental Education stock jumps in Hong Kong, after a plan to issue a special dividend on its US-listed shares. Fuyao Glass shares gain in Hong Kong after the automobile glassmaker reported a 23% y/y rise in net income for the first half-year.
- DBS Group shares rise as much as 3.9%, the most since April 22, after the bank’s second-quarter net income beat the average analyst estimate.
- Fuyao Glass share gain as much as 5.1% in Hong Kong, the most since April 26, after the automobile glassmaker reported net income for the first half-year rise 23% y/y.
- Daikin shares plunge as much as 15% to the lowest since June 2020, after the Japanese air conditioning equipment maker reported first-quarter operating income that missed the average analyst estimate.
Related Market News
- Taking Stock: The outsized drop in bank shares during the recent rout in Japanese stocks has the potential to bring an off-the-scale recovery.
- Global Wrap: Stocks rallied after the Bank of Japan moved to reassure markets in the wake of historic volatility sparked in part by its unexpected interest rate hike last week.
- Inside Asia: The Indonesian rupiah outperformed Asian currencies as the nation’s forex reserves rose by the most this year. The yuan fell as the People’s Bank of China eased its support for the currency.
Notes From the Sell-Side
- Despite Group-of-10 rates differentials remaining wide, the spike up in currency volatility will likely put an end to the effectiveness of carry trading strategies, according to Societe Generale.
- It’s time to buy the dip in European technology stocks, as the recent selloff has left the performance of semiconductor shares lower than the group’s earnings momentum, according to Barclays strategists.
- A sharper fall in US yields — from expectations the Fed will reduce interest rates at a faster pace — may reduce dollar-offshore yuan’s fair-value range in the next year, according to Tiffany Wang, an emerging market strategist at JPMorgan Chase & Co.
- Options appear expensive on companies including NIBE Industrier and Adyen, while contracts on ASML and UMG screen cheap. Below are the Stoxx 600 stocks with the largest premiums and discounts in one-month, at-the-money implied volatility vs. realized relative to the Euro Stoxx 50 as of Aug. 6.
- Goldman Sachs recommends turning “moderately defensive” in Asia Pacific allocations, upgrading Malaysia stocks to market-weight and downgrading Singapore to underweight.
- The New Zealand dollar remains at the mercy of global forces even after it rose following stronger-than-expected jobs data, according to Bank of New Zealand.
OPTIONS
- CSPC Pharma, MTR, Techtronic, Trip.com in Focus: HK Options
- Mirvac Group, Northern Star in Focus: Australia Options
- NTPC, Polycab India, Maruti Suzuki: India Options Wrap
- LG Innotek, LG Uplus, Posco Holdings: South Korea Options Wrap
This story was produced with the assistance of Bloomberg Automation.
(Updates with latest index levels.)
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