Headline indices of the Asia Pacific market rallied sharply on Thursday, 19 September 2013, on the back of fresh wave of confidence after the Federal Open Market Committee's surprise decision to keep its bond-buying program intact.
From Jakarta to Manila, Tokyo to Sydney investors celebrated the prospect of prolonged stimulus in the world's largest economy. MSCI's broadest index of Asia-Pacific shares outside Japan jumped 2.2% to a four-month peak.
Federal Reserve chairman Ban Bernanke said the US would continue its $85 billion a month quantitative easing a little while longer, amid concerns that the economy may not be quite out of the woods yet. The decision sent the US market soaring to fresh record highs, with Asia Pacific market following in its wake.
The U.S. Federal Reserve defied investor expectations on Wednesday by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth. The Fed continued its monthly purchases at $45 billion for Treasuries and $40 billion for MBS.
The Fed left its 6.5% unemployment and 2.5% inflation thresholds intact, while leaving any future moderation in asset purchases up to the data, should it continue to support expected improvements in the labour market and inflation.
Furthermore, Fed Chairman Ben Bernanke refused to commit to reducing the bond purchases this year, and instead went out of his way to stress the program was not on a preset course. In June he had said the Fed expected to cut back before year end. It also seems, that the possibility of another acrimonious stand-off between the President and the Congress on raising the debt ceiling might have made Mr. Bernanke and his company to duck for the time being.
In fresh quarterly forecasts, the Fed cut its projection for 2013 economic growth to a 2.0% to 2.3% range from a June estimate of 2.3% to 2.6%. The downgrade for 2014 was even sharper. The Fed has held overnight interest rates near zero since late 2008 and has more than tripled its balance sheet to more than $3.6 trillion through three rounds of bond buying aimed at holding borrowing costs down.
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The decision not to taper bond purchases faced a single dissent. Kansas City Federal Reserve Bank President Esther George, who has dissented at every Fed policy meeting this year, repeated her concerns that the low-rate policy could lead to asset bubbles.
Confidence were further underpinned on hopes that U.S. interest rates could stay low for longer after news from the White House that noted-dove Janet Yellen was the front-runner to take over the Fed when Ben Bernanke steps down in January.
Among Asian bourses, Tokyo shares rallied sharply after the U.S. Federal Reserve Board decided not to taper its quantitative monetary easing, sending the benchmark Nikkei Stock Average 1.8% higher from prior day to finish at 14766.18.
Also supporting the Tokyo market was a Nikkei report before the bell that said Prime Minister Shinzo Abe has called on government officials to include a two-stage lowering of cooperate taxes in the economic stimulus measures that would be implemented if the consumption tax is raised in April as planned.
Shares of real-estate companies were biggest winner in Tokyo market as the benchmark 10-year Japanese government bond yield fell to 0.665%, the lowest since May 10, tracking fall in U.S. Treasury yields' overnight. JGB yields set the benchmark for lending rates, upon which land developers depend in order to make purchases. Sumitomo Realty & Development added 5.4% at 4880 yen and Mitsubishi Estate rose 4.5% at 2969 yen.
In Australia, Australian share market closed the session at fresh five year higher, as investors returned in droves after the Federal Reserve's surprise move to leave its stimulus measures intact. The benchmark S&P/ASX200 advanced 57.40 points, or 1.1%, to 5295.50, while the broader All Ordinaries grew 58.20 points, or 1.11%, to 5288.60.
Shares of precious-metal miners were top gainers in Sydney after the price of the precious metal rallied more than 4% overnight on the US Federal Reserve's decision to continue buying bonds. Perseus Mining was up 20.7% to A$0.67, Kingsgate Consolidated rose by 16.5% to A$1.91 and Newcrest Mining jumped by 7.9% to A$12.93.
In New Zealand, NZ stocks continued higher today, pushing the NZX 50 Index 49.205 points, or 1%, higher to 4753.035, a new record, as the Federal Reserve kept its stimulus unchanged and the local economy grew more than expected.
Nuplex Industries rose 3.3% to NZ$3.46 after the company said in a strategic update presentation posted to the NZX that it is targeting sales from its Asian operations of NZ$500 million a year.
In Hong Kong, HK share market closed sharp higher, fuelled by buying of a broad range of issues, with real estate and financial stocks leading rally after the U.S. Federal Reserve Board decided not to taper its quantitative monetary easing. The Hang Seng Index advanced 1.67% to 23502.51 and the Hang Seng China Enterprises Index jumped 1.71% to 10769.54.
Shares of Property counters soared in Hong Kong as US bond yields declined. Sino Land Co was the top blue-chip gainer, soaring 9.2% to HK$11.92. Henderson Land Development Co rose 4.9% to HK$70.70 and Cheung Kong Holdings added 2.3% to HK$122.70. New World Development Co added 4.7% to HK$12.54 and Sun Hung Kai Properties put on 5.3% to HK$109
Finance issues were stronger as well in Hong Kong, with HSBC Holdings added 2% to HK$87.95, China Construction Bank Corp rose 1.5% to HK$6.20 and Industrial and Commercial Bank of China added 1.8% to HK$5.59.
In India, Indian benchmark indices extended intraday gains and hit fresh intraday high in afternoon trade as world stocks rose after the US Federal Reserve after a monetary policy review on Wednesday, 18 September 2013, decided to maintain stimulus to the US economy through monthly bond purchases of $85 billion. Fed's bond-buying program has been a source of liquidity for most Asian and emerging markets this year. At 14:25 IST, the S&P BSE Sensex was up 710 points or 3.6% to 20,672.
The market sentiment in India was boosted by data showing that foreign funds remained net buyers of Indian stocks on Wednesday, 18 September 2013. Foreign institutional investors (FIIs) bought shares worth a net Rs 580.13 crore on Wednesday, 18 September 2013, as per provisional data from the stock exchanges.
Shares of private sector bank Yes Bank jumped a staggering 23.54%. FMCG stocks rose as good rains this year could boost rural sales, with biscuits major Britannia Industries hitting record high. Index heavyweight and cigarette major ITC extended intraday gains. Oil exploration major ONGC and Tata Power Company also extended intraday gains. IndusInd Bank jumped after block deal.
Elsewhere, Indonesia's JKSE Composite surged 4.82%, Singapore's Straits Times Index added 1.85% and Malaysia's KLSE Composite rose 1.26%. Mainland Chinese, Taiwanese and South Korean markets are closed today.
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