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Singapore - Asian stocks rose, extending a weekly gain, as Japanese shares jumped in volatile trading after the central bank said it will adopt negative interest rates, and energy companies climbed as oil extended its rebound.
The MSCI Asia Pacific Index increased 1.6% to 121.52 as of 5:06 p.m. in Tokyo, taking its weekly gain to 2.5%, the first in four weeks. The Topix index jumped, plunged and then jumped again to end 2.9% higher after the Bank of Japan sprung another surprise on investors, adopting negative rates to spur banks to lend in the face of a weakening economy.
Shares in Shanghai gained 3.1%. The regional benchmark gauge is still down 7.9% this month on concern about a slowdown in China and a rout in oil and other commodities.
“It’s surprising that it’s been introduced," Kazuhito Suzuki, a senior strategist at Shinkin Asset Management, said about the BOJ’s rate decision. “If the yield curve overall decreases, the lower rates will support the economy and weaken the yen. It’ll be positive for stocks through corporate earnings.
That said, the introduction of negative interest rates is a first, so we need to keep confirming what impact it has."
The BOJ’s board was split 5 to 4 on the decision to set an interest rate of minus 0.1% on a portion of the current accounts held by financial institutions at the central bank. The change takes effect on February 16, the central bank said Friday at the conclusion of a two-day policy meeting.
The BOJ pledged to keep increasing the monetary base at an annual pace of ¥ 80trn ($663bn), primarily by continuing to purchase Japanese government bonds, exchange-traded funds and real estate investment trusts.
Weakening Yen
“This is positive for equities,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management, which oversees about $41bn, said by phone. “They’re trying to weaken the yen to boost exports and get savers to spend. Markets may have seen the worst in January. Fears of a global recession aren’t justified especially with central banks remaining supportive.”
The yen fell 1.6% to 120.71 per dollar as of 5:07 p.m. in Tokyo.
Governor Haruhiko Kuroda’s task in achieving his goal of sustainable inflation remains difficult amid subdued wage growth and a renewed decline in oil prices. Government data released this morning showed the nation’s core consumer-price index increased 0.1% in December from a year earlier, in line with economist estimates, while industrial production fell more than expected.
Japan earnings
Friday was also the busiest day of Japan’s earnings season, with 333 companies in the 1 934-member Topix reporting. Of the firms in the benchmark gauge that have already posted results and for which Bloomberg has estimates, more than half missed analyst predictions for profit.
South Korea’s Kospi index gained 0.3%. Australia’s S&P/ASX 200 Index advanced 0.6%. New Zealand’s benchmark gauge was added 0.3%. Singapore’s Straits Times index jumped 2.1%. Hong Kong’s Hang Seng Index rose 2.5%. Taiwan’s Taiex index increased 2.2% even as the nation’s economy shrank for a second straight quarter as China’s economic slowdown dragged on the island’s exports.
China’s Shanghai Composite Index capped its first advance in four days amid speculation the steepest monthly selloff since the global financial crisis was overdone, while the central bank injected more liquidity into the financial system to avert a cash crunch before next month’s holidays.
Cnooc surges
Cnooc jumped 9.6% in Hong Kong, as energy producers led gains on the regional benchmark measure, spurred by more gains in the price of oil. Tokyu Fudosan Holdings surged 15% in Tokyo to lead a rally among Japanese developers seen benefiting from negative interest rates.
Japanese lenders declined, with Shinsei Bank plunging 11%.
E-mini futures on the Standard & Poor’s 500 Index jumped 1.1% on Friday. The US equity benchmark gauge gained 0.6% on Thursday as a rally in oil bolstered energy shares and investors digested earnings from Facebook to Under Armour.
The Federal Reserve left key US interest rates unchanged this week and said officials were “closely monitoring” developments from China to Europe for any adverse impact on the economy.
Oil futures gained as much as 2.7% on Friday, extending on Thursday’s 2.9% rally, after Russia’s Energy Minister Alexander Novak indicated he was willing to meet with OPEC next month to coordinate oil-output policy. OPEC delegates said no meeting has been planned.
