Hong Kong: Shares in Asia bounced sharply upwards on Wednesday as bargain hunters moved in to take advantage of recent falls and traders pounced on a weakened yen.
But there were warnings that the surge could quickly run out of steam because of poor global fundamentals.
Tokyo opened up 1.54%, Hong Kong was 1.03% higher, Seoul added 2.54% and Sydney jumped 1.53%.
Shanghai also moved higher, adding 0.42% at the opening.
The reversal in Tokyo’s fortunes came after traders shut up shop on Tuesday having driven the market to its lowest point in more than two years.
Exporters were leading the upward charge after the yen weakened in the wake of an announcement by the Swiss central bank that it would fight to keep the franc’s value down.
The move sparked speculation that the Japanese government might follow Switzerland’s move and step in to crimp the stubbornly high yen, a persistent headache for companies trading overseas.
Major players such as Sony, Toshiba and Toyota Motor hit 2011 lows Tuesday.
But Takuya Yamada, senior portfolio manager at ITC Investment Partners, told Dow Jones Newswires the boost to exporters would likely not last.
“This yen-induced buy-back won’t last, as the bigger issue surrounding the European debt crisis looms in the background,” he said.
The greenback fetched ¥77.43 in Tokyo trade against ¥77.68 in New York late Tuesday, after the US unit strengthened in the wake of the Swiss bank’s action.
The euro traded at $1.4032, up slightly from $1.3992. The European common currency was flat at ¥108.68 compared to ¥108.70.
“The currency market has calmed down in Asia,” said Gen Kawabe, senior dealer at Chuo Mitsui Trust and Banking.
“There will be a lot of very burnt people overnight. Everyone is going to be licking their wounds,” HiFX senior trader Stuart Ive told Dow Jones Newswires.
The Swiss National Bank on Wednesday took markets by surprise when it announced a minimum exchange rate of 1.20 francs per euro, saying the current value of the franc was a threat to the economy.
The Swiss central bank said it had “the utmost determination and is prepared to buy foreign currency in unlimited quantities,” saying that the peg value was “still high” but that further measures could be taken if deflationary risks persisted.
The franc, which has surged by about 20% since 2009 as investors seek refuge from markets roiled by fears over the fragility of the European and US economies, dropped nearly 10% after the exchange rate was capped.
Markets will be watching Japan’s reaction to the move, particularly in the light of a declaration by the country’s new finance minister that he will be raising the issue of the strong yen with his Group of Seven counterparts at a meeting in France starting Friday.
But Kawabe noted, “The yen weakened overnight but its rise is likely to be capped at levels above ¥78 per dollar on brisk demand from Japanese exporters to sell dollars at those levels.”
Stock markets in the United States and across much of Europe tumbled on Tuesday amid the 17-nation eurozone’s debt woes and a possible US slowdown, but later enjoyed a modest rebound.
On Wall Street, the Dow Jones Industrial Average, which lost more than 2% in the first minutes of trade, closed down 0.90% at 11,139.30, its third straight trading day with triple-digit losses.
Investors were unsettled by anti-austerity protests in Italy and Spain and concerned by signs that Greece might fail to meet debt-cutting goals and that Germany may drop support for the latest Greece bailout plan.
Gold was well off the record high of $1,920.90 it hit Tuesday, trading around $1,873 an ounce at 07:30 am.
Oil was up, with New York’s main contract, West Texas Intermediate (WTI) light sweet crude for delivery in October, adding 51 cents to $86.53 per barrel. Brent North Sea crude for October delivery added 39 cents to $113.28.