Trade deal, easy monetary policy boost Asia stocks
Agreement on a Pacific-wide freetrade agreement and hopes major central banks will maintain extraloose monetary policies fired another broad rally in Asia Tuesday, tracking advances in Europe and New York.
In Hong Kong shares in mining giant Glencore added to the previous day’s surge following reports it is in talks to sell its agriculture business as it battles weakening demand for raw materials.
But the main focus was on the Trans-Pacific Partnership, which will see the easing of a number of barriers, including to Japan’s closeted farm sector and the U.S. car market.
After five years, trade representa- tives from 12 nations on the Pacific Rim said Monday they had finally hammered out a deal to create the world’s biggest free-trade area — encompassing 40 percent of the world economy.
Japanese Prime Minister Shinzo Abe hailed the deal and expressed a hope that China would join at some point.
“It’s the opening of a new century for the Asia-Pacific region,” he said in a televised news conference Tuesday.
“If China participates in this system in the future, that will contribute to both Japan’s security and the stability of the Asia-Pacific region,” he added.
The accord also earned a strong endorsement from International Monetary Fund chief Christine Lagarde, who said it was “not only important because of the size ... it also pushes the frontier of trade and investment in goods and services to new areas where gains can be significant.”
Analysts said the news would boost stocks in the region, adding to an already upbeat mood among investors.
Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo, told Bloomberg News the TPP “has a lot of potential to become a big deal for the U.S. and Japan.”
He added: “Concerns over the global economy had become in- grained in the market’s mindset. It’s possible that the TPP has triggered some regret over having sold too much.”
US Dollar Weakness
Confidence on Asia’s trading floors was already buoyant after Friday’s below-forecast U.S. jobs numbers, which raised fears that the recent turmoil in global economies was filtering through to the world’s biggest.
The report also muddied the waters for the Fed as it considers raising rates, with many experts saying its timeline for a hike before 2016 has likely been scuttled.
Japan’s central bank holds a twoday policy meeting from Tuesday, with speculation it will widen its already vast stimulus program to try to reinvigorate the struggling economy, while its European counterpart is also considering further easing.
“Markets continue to believe that weak data will pressure central banks in Europe and Japan to provide more stimulus and will delay the U.S. Federal Reserve in its pursuit to begin withdrawing monetary stimulus,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney said in a note to clients.
This “continues to have investors believe that asset prices can defy the weak growth environment.”
With the likelihood of a U.S. rate rise receding the dollar weakened against higher-yielding, or units.
Equity markets advanced as riskaversion eased.
Tokyo ended 1.00 percent higher, Sydney gained 0.33 percent and Seoul was 0.63 percent up. Shanghai was closed for a public holiday.
However, Hong Kong eased 0.28 percent in the afternoon on profittaking after surging more than 6 percent in the previous three sessions.
However, Glencore was 4 percent higher. The firm added 17.76 percent Monday — having soared more than 70 percent at one point — on reports of the sale of its agribusiness.
Singapore’s sovereign wealth fund, Japanese trading house Mitsui & Co.,
riskier, and a Canadian pension fund are among potential buyers of the unit, Bloomberg News reported last week.
The agricultural unit could be worth US$10 billion, according to research cited by Bloomberg News.
Shares in the Swiss-based firm swung wildly last week on fears that sinking commodity prices — caused by a growth slowdown in key market China — would affect its ability to meet outstanding debt obligations.
Shares in New York and Europe ended strongly. The Dow surged 1.85 percent, the S&P 500 climbed 1.83 percent and the Nasdaq was up 1.56 percent. London jumped 2.76 percent, Paris soared 3.54 percent and Frankfurt gained 2.74 percent.