Hong Kong: Asian stocks advanced on Thursday, heading for a quarterly gain despite a sharp sell-off earlier this month after disaster struck Japan, while the yen was poised for a quarterly loss on expectations Tokyo will have to maintain super-loose monetary policy far longer than Europe and the United States.
Concerns about the impact on high oil and food prices on global growth and central bank moves to curb inflation have overtaken worries about Japan’s nuclear crisis and unrest in the Middle East. This has caused some analysts to remain cautious even on investments in faster-growing Asian markets.
“Most of the Asian economies will grow more moderately than last year. They are encountering more hurdles like inflation and controls in capital flows. This could create some disincentives to invest in Asia broadly. You have to invest in selective markets” said Thomas Lam, group chief economist at OSK-DMG in Singapore.
Lam cited Indonesia, Malaysia and Singapore as likely better performers than Hong Kong and Thailand.
Still analysts predict emerging Asian markets will on average fare than developed ones this year.
MSCI’s index of Asia-Pacific shares outside Japan rose 0.5 percent on the day, putting it on track for a 4.7% gain in March despite a sharp downward spike following the massive earthquake and tsunami which hit Japan on March 11, severely damaging a nuclear power plant and knocking many factories offline.
For the year to date, the Asia ex-Japan index has gained 1.2%.
By comparison, the MSCI world index dipped 0.2% in March, but has gained around 4% so far in 2011. Relative weakness in Asia was offset by strong gains early in the year in major U.S. and European indexes as investors rotated from emerging markets to large, developed ones.
The US S&P 500 index has risen 6.3% so far this year and the FTSEurofirst 300 index of leading European shares has managed a 1.2% rise.
Emerging vs developed markets
A key investment decision for Asian stock investors in the coming months will likely be whether to pile bets on China and the faster-growing economies in Asia over safer but lower-returning investments in developed economies, analysts said.
Gross domestic product of emerging markets will on average expand 6.0% in 2011 and 2012, more than double those of developed markets, according to JPMorgan economists.
In Asia, Japan is expected to lag its neighbors as the world’s No. 3 economy faces huge rebuilding cost from the twin disasters this month and the still unknown toll from the damaged nuclear plant, which is still leaking radiation.
The yen has declined to the lowest since May 2010 against the euro in the wake of recent hawkish comments by euro zone officials signalling interest rate hikes, and has slid against the dollar as well after U.S. central bank officials indicated the economy may now be strong enough that it no longer needs further stimulus.
On the last day of Japan’s fiscal year, the Nikkei index was up nearly 0.5% late in a choppy session. So far in March, it has shed 8.3%, heading for its worst month since May 2010. Year to date, the benchmark has fallen around 5%.
The weaker yen is expected to boost the demand for Japanese goods in overseas markets, though investors remain concerned about the impact of power shortages on Japanese manufacturers following the disasters.
It is also seen as a cheap way to fund higher-yielding assets such as the Australian dollar which reached a 10-month high against the yen and a 29-year high against the US dollar in early trading.
But the yen on Thursday pulled back from its earlier lows, trading flat to slightly higher against major currencies.
The dollar was last at 82.74 yen , up 9% from its record low of 76.25 yen on 17 March before G-7 central banks intervened in a rare coordinated move to stem the yen’s rise.
The euro last traded at ¥117.11. It had risen high as ¥117.54 earlier , its highest since May 2010, bringing its gains this year to 8%.
Concerns over Japan’s nuclear crisis, conflicts in the Libya and nagging fiscal problems in Europe have eased, for now, with expectations that stocks worldwide will move higher into the new quarter on an improving economic outlook, analysts said.
Gold rebounded from initial losses tied to profit-taking. It snapped a four-session losing streak on Wednesday. For the quarter, gold as well as bonds generated small returns.
Barclays Capital’s global aggregate bond index has risen 1.05% so far this year.
Spot gold traded at $1,426.86 an ounce, compared with $1,423.38 late in New York on Wednesday. It has been running 2% below the record of $1,447.40 set on March 24.
US oil prices rose after falling on Wednesday on data showing ample inventory in the United States, the world’s biggest energy consumer. This offset worries over supply disruption from the turmoil in Libya and the Middle East.
US crude was up 41 cents to $104.68 a barrel, while Brent crude advanced 42 cents to $115.55, posting more than a 24% increase so far this year.