Ian Chua / Reuters
Hong kong: Asian stocks extended gains on Tuesday, 21 August, as credit concerns eased and a softer yen buoyed Japanese exporters, while a move by China to let residents invest directly in Hong Kong securities gave the Hang Seng Index a boost.
Investor confidence was recovering after the US Federal Reserve sought to calm markets by slashing a key US bank lending rate on Friday, although concerns about a global credit shortage continued to linger.
“Even though we saw strong gains yesterday, there is still concern about the impact from the US subprime issue to the US economy. We’ll still see high volatility,” said Kim Joong-hyun, an analyst at Goodmorning Shinhan Securities in South Korea.
After a wobbly start, MSCI’s measure of Asia Pacific stocks excluding Japan rose 2% by 0221 GMT, extending Monday’s 6% surge — its biggest one-day percentage gain since September 1998.
Tokyo’s Nikkei average was up 1.5% by the end of morning trade, adding to Monday’s 3% rise, as investors bought exporters such as Sony Corp. and Canon Inc. following declines in the yen on Monday.
Exporters tend to benefit from a weaker currency as it boosts the value of overseas sales.
“The Tokyo market is getting back to normal as shares that should be bought are being bought and shares that should be sold are sold, in contrast to the across-the-board selloff or buying of stocks seen in recent sessions,” said Tsuyoshi Segawa, an equity strategist at Shinko Securities.
Hong Kong’s Hang Seng Index advanced 4.5% after China permitted residents in the northern port city of Tianjin to invest directly in Hong Kong-listed securities under a pilot programme aimed at encouraging money to flow out of the country.
“Although this is a test programme, it is effectively allowing all residents to invest in Hong Kong,” said Conita Hung, head of equity markets at Delta Asia Financial Group.
China stocks listed in Hong Kong, or H shares, surged 7%, while China mainland stocks also rose, pushing the Shanghai Composite Index to a fresh life high.
Other major markets in the region were all up between 0.2% and 2%. Philippines stocks jumped 8.7%, playing catch up to regional gains after a holiday on Monday.
Yen off lows
After extending losses broadly on Monday, the yen found a tentative footing in early Asian trading. The fall has reversed some of the yen’s recent rally, sparked by a drop in risk appetite that prompted an unwind in carry trades.
In a carry trade, investors borrow a low interest-rate currency, such as the yen, to buy riskier but higher yielding assets.
“Market participants don’t look as if they’ve restarted carry trades,” said a trader at a Japanese trust bank. “They continue to have fears that market turmoil is not over.”
The dollar fetched 115.08 yen off a high near 115.50 on Monday, but was still well above the 14-month low of about 111.60 yen plumbed late last week.
The euro bought 155.10 yen after losing group of Monday’s peak near 156 yen but like the dollar, it was holding above Friday’s nine-month low of about 149.20 yen.
Against the dollar, the euro was trading at $1.3473, little changed from late New York levels.
Strength in the Nikkei weighed on Japanese government bond futures, knocking the September 10-year futures down from a 17-month peak struck on Friday.