Asia stocks edge up af­ter Ja­pan pol­icy boost; debt shines

The Pak Banker - - MARKETS/SPORTS -

Asian stocks started a new month on a cau­tious note on Mon­day, with the Bank of Ja­pan's sur­prise pol­icy eas­ing spark­ing some buy­ing but fur­ther signs of eco­nomic weak­ness in China and a fall in oil prices keep­ing in­vestors on guard.

Euro­pean stocks were broadly ex­pected to open steady with spread­bet­ters ex­pect­ing Bri­tain's FTSE 100 (.FTSE) to open up 0.4 per­cent, Ger­many's DAX (.GDAXI) to open 0.2 per­cent higher, and France's CAC 40 (.FCHI) to be un­changed.

The green­back con­tin­ued to ben­e­fit from the grow­ing mon­e­tary pol­icy di­ver­gence be­tween the U.S. and its coun­ter­parts in Europe and Asia while bonds, es­pe­cially in­vest­ment grade debt, re­ceived a boost af­ter Ja­pan's sur­prise de­ci­sion to in­tro­duce neg­a­tive in­ter­est rates last week.

MSCI's broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan edged up 0.1 per­cent, af­ter los­ing 8 per­cent in Jan­uary.

Aus­tralia (.AXJO) and Ja­pan (.N225) led re­gional mar­kets with gains of 0.8 and 2 per­cent, re­spec­tively, while Chi­nese stocks (.SSEC) slipped in af­ter­noon trade. "In the short-term, the sur­prise move by Ja­pan will be a cat­a­lyst for global eq­ui­ties but it only un­der­lines the weak­ness of the global econ­omy and we need to see some strong eco­nom­ics data for a sus­tain­able rally," said Cliff Tan, head of global mar­kets re­search with Bank of Tokyo- Mit­subishi UFJ. Mon­day's batch of eco­nomic data from China added to wor­ries about the health of the world's se­cond-largest econ­omy and only in­creased calls for more pol­icy eas­ing from China. Ac­tiv­ity in China's man­u­fac­tur­ing sec­tor con­tracted at its fastest pace in al­most three-and-a-half years in Jan­uary, miss­ing mar­ket ex­pec­ta­tions, while growth in the ser­vices sec­tor slowed, of­fi­cial sur­veys showed on Mon­day.

"As de­fla­tion­ary pres­sures re­main high, fur­ther re­serve re­quire­ment cuts are still needed to sup­port the slow­ing econ­omy and per­ma­nently in­ject liq­uid­ity into the mar­ket," ANZ strate­gists wrote in a note. They ex­pect a to­tal of 200 ba­sis points of cuts this year with a 50 ba­sis points cut com­ing in the first quar­ter. "In fact, re­frain­ing from fur­ther eas­ing could risk an even weaker econ­omy, which will then in­ten­sify de­pre­ci­a­tion ex­pec­ta­tion and cap­i­tal out­flows."

The Shang­hai Com­pos­ite In­dex (.SSEC) fell more than 2 per­cent, while the CSI300 in­dex of the largest listed com­pa­nies in Shang­hai and Shen­zhen fall­ing by 2.2 per­cent, ex­tend­ing its dis­mal per­for­mance from Jan­uary. Jan­uary was the worst monthly per­for­mance for the Shang­hai mar­ket since the 2008 cri­sis with more than a 10 per­cent loss.

The Bank of Ja­pan said it would charge for a por­tion of bank re­serves parked with the in­sti­tu­tion, an ag­gres­sive pol­icy pi­o­neered by the Euro­pean Cen­tral Bank (ECB). Ear­lier in Jan­uary, the ECB in­di­cated it could cut rates fur­ther in March.

"The fact that both the BOJ and the ECB sud­denly showed ad­di­tional eas­ing stance af­ter the mar­kets' rout sug­gests pol­i­cy­mak­ers in Ja­pan and Europe share con­cerns and take ac­tions," Masa­fumi Ya­mamoto, chief cur­rency strate­gist at Mizuho Se­cu­ri­ties, said.

In con­trast, the U.S. Fed­eral Re­serve has so far stuck to the script that it will grad­u­ally raise in­ter­est rates this year even though bets have been pared back with Fed­eral Fund rate fu­tures pric­ing in barely one hike this year.

Else­where, fixed in­come mar­kets cheered a fresh round of pol­icy eas­ing from a ma­jor global cen­tral bank with in­vest­ment grade debt in Asia end­ing a tor­rid Jan­uary on a high note.

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