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Asian stocks strong; yen, Japanese debt tumble

Asian stocks strong; yen, Japanese debt tumble

Hong Kong, 23 Aug - Asian stocks opened stronger on Thursday (23 Aug) as growing hopes the worst of the recent credit market storm may be past fuelled appetite for riskier assets, hurting government bond prices and sending the yen down.

Japanese government bond futures plunged in early trade, tracking a slide in US Treasuries and hit by caution before the Bank of Japan’s policy decision due later in the day.

But stock markets in Tokyo, Seoul and Sydney all jumped more than 2% in the opening minutes of trade, taking their cue from a rise in Wall Street overnight and signs that US takeover activity could soon recover.

“The worst is over, although whether this marks the start of a sustained rally is doubtful given that we still have to face stock markets that are highly valued," said Kim Hak-kyun, an analyst at Korea Investment and Securities.

MSCI’s measure of Asia Pacific stocks excluding Japan was up 1.9% at 0056 GMT, pointing to a fourth consecutive session of gains.

The index is now more than 12% above a five-month trough plumbed last Friday (17 Aug), but still more than 10% below its 24 July record high.

Major US stock indexes including the Dow Jones industrial average, Standard & Poor’s 500 and Nasdaq Composite all rose more than 1% on Wednesday 22 August.

But after the close S&P 500 index futures jumped, indicating a sharply higher open today, following a Wall Street Journal report that Bank of America Corp. plans to invest $2 billion in preferred stock issued by mortgage lender Countrywide Financial Corp.

“Subprime concerns seem to be easing," said Masayoshi Yano, senior manager of investment information at Tokai Tokyo Securities Co Ltd.

“The fact that M&A activity resurfaced in the US market means liquidity may have started to come back," he said.

Exporters lead gains

Australian shares rose 2.1%, buoyed by Wall Street gains and as strong earnings boosted shares in top miner BHP Billiton Ltd and fund manager AMP Ltd

Seoul’s benchmark Korea Composite Stock Price Index (KOSPI) rose more than 3%, boosted by exporters such as Samsung Electronics.

Exporters such as Toyota Motor Corp also helped drive the rally in Japan, where the benchmark Nikkei average rose more than 2%. Japanese companies that sell abroad benefited from a softer yen.

The yen extended a slide against the dollar and other higher-yielding currencies. Waning risk aversion was expected to reduce the unwinding of yen carry trades, in which the low-yield currency is used to buy assets in higher-yielding ones.

The dollar rose to 115.81 yen up from around 115.30 yen in late US trading on 22 August almost 4 yen higher than lows plumbed last week around 111.6 yen. The euro rose to 156.85 yen compared to around 156.20 yen in late New York.

Still, foreign exchange traders are keeping a close eye on the Bank of Japan’s policy meeting, which ends on Thursday. The central banks is widely expected to keep interest rates steady at 0.50%, so the focus will be on remarks by BOJ Governor Toshihiko Fukui at a news conference afterwards.

The yen could gain support if Fukui says anything that points to the possibility of a rate rise in the coming months.

US government debt prices fell on 22 Aug as investors began to doubt there would be an imminent cut in the fed funds rate target for overnight lending and a return of investor confidence dampened the safe-haven bid.

In other asset classes, oil fell after a government report showed US crude inventories rose unexpectedly last week, easing supply concerns.

US crude settled down 31 cents at $69.26 a barrel, though markets were awaiting news from Mexico about any potential damage to offshore production installations from Hurricane Dean. REUTERS

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