Hong Kong: Gold struck another peak on Thursday because of its investor appeal as a safe asset and Asian stocks looked past Wall Street’s weak finish to eke out gains.
The yen slipped amid growing market talk that Japan may step up quantitative easing to battle deflation.
Gold surged to a new high of $1,224.65 an ounce, while the yen extended its losses, falling to 87.80 per dollar, on speculation Japan could be embarking on another round of quantitative easing, while the Japanese Prime Minister’s concerns about the currency’s rise stoked intervention hopes.
Asian shares were lead by strong gains in Japan and South Korea as investors ignored the broad weakness in US stocks and kept buying metals and consumer discretionary industries.
Japan’s Nikkei stock average jumped after the yen’s fall boosted exporters and gold’s rise propped metal shares, taking the benchmark further above last week’s four-month lows.
The yen continued on a downward spiral after Prime Minister Yukio Hatoyama said the recent rise could not be left alone. There was also rising speculation that authorities could flood the market with funds when the rest of the world was weighing a way out of easy monetary policy.
It fell to 87.89 yen per dollar, with stop-loss sell orders triggered around 87.50. The weakness adds to its 0.9% loss in the previous session -- the largest daily drop in six weeks.
The MSCI index of Asia Pacific stocks traded outside Japan edged up 0.42%.
“There is a lot of interest in emerging market equities and a lot of money is coming out of Europe and the US,” said Alex Boggis, fund manager at Aberdeen Asset Management, which oversees $240 billion in investments.
“People have got the message they want growth and protection against a possible US dollar depreciation.”
Leading the rise in Asia were materials shares, which were up 0.44%, and the consumer discretionary sector, 0.36% higher.
Consumer discretionary, information technology and materials indusrtries are expecting the highest earnings growth rates over the next 12 months with companies in Taiwan expecting the maximum gain, a Thomson Reuters Starmine research report said.
The report is based on latest estimates from top analysts.
In Japan, shares of Mitsubishi Motors soared 17.7% to 140 yen after a media report PSA Peugeot Citroen is in talks to acquire a 30-50% stake while exporters like Canon were lifted by the weak yen.
The yen and the dollar fell further after Bank of America said it would repay $45 billion of taxpayer bailout funds, boosting investor confidence and trimming safety bids in those currencies.
Analysts expect the US dollar’s long-term weak outlook to sustain flows into emerging markets such as Asia ex-Japan.
BNP Paribas said it expects Asia to receive $35 billion in portfolio inflows in 2010, up from $27 billion in 2009, a year during which stocks have posted gains of nearly 70%.
Gold should remain a beneficiary of the weak dollar story as the mammoth debt burden facing the United States has invetsors fleeing to alternative assets.