By Chikako Mogi
TOKYO (Reuters) - Wall Street's record closing overnight and optimism about the Chinese economy underpinned Asian shares on Thursday while the yen marked time before testing fresh lows against major currencies as the Bank of Japan's bold stimulus moves continue to kick in.
Chinese banks made 1.06 trillion yuan of new local currency loans in March, central bank data showed on Thursday, well above market expectations and adding to evidence of an economic recovery being fuelled by ample credit. The data followed Thursday's trade figures, which signalled a recovery in domestic demand.
The fresh loans number "is really big and shows that there is ample funding in the Chinese economy to support growth and is positive for sentiment," Dariusz Kowalczyk, senior economist for ex-Japan Asia at Credit Agricole CIB in Hong Kong said.
The strong growth in credit improves the outlook for further economic expansion in China, he added.
The improving growth prospect in the world's second-largest economy, coupled with solid equities performance in the U.S., helped offset other lacklustre events such as a steeper-than-expected drop in Australian employment that pushed the jobless rate to a three-year high and a surprise move by the Bank of Korea to keep interest rates steady rather than a cut.
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The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.7 percent, led by a 0.8 percent gain in Hong Kong shares.
Australian shares were up 0.8 percent despite the local jobs data, which nevertheless pushed the Australian dollar down 0.3 percent to $1.0510 as investors priced in a greater chance of a cut in interest rates.
South Korean shares were flat while the Korean won briefly extended gains after the Bank of Korea held interest rates, opting to further assess the effect of the government's stimulus steps and tensions with North Korea.
Shares in Korea "are likely to resume their rebound as global market conditions are favourable," said Lim Dong-rak, an analyst at Hanyang Securities. "The KOSPI has taken a hit from the yen's slide and the geopolitical risk, but the decoupling from global markets seems to be coming to an end."
The Dow Jones industrial average and the Standard & Poor's 500 Index both ended at historic highs on Wednesday, led by cyclical shares on China's rosier demand outlook.
The Nikkei stock average rose 1.3 percent after earlier hitting its highest since July 2008.
"Aggressive easing by the Bank of Japan has been rapidly priced in by global rates markets as investors search for yield. However, global equities are only starting to price in the BOJ actions as 'risk on'," Barclays Capital said in a research note.
"We believe this delay reflects weaker cyclical data in the U.S. and the euro area; the differentiation by equity investors and initial scepticism about the global implications of QE (quantitative easing) in Japan."
JAPAN ENIGMA
The yen remained near recent lows. The dollar was at 99.56 yen and the euro traded at 130 yen, while the Aussie was at 104.62 yen.
The U.S. dollar also was supported after the minutes of the U.S. Federal Reserves' March meeting suggested Fed officials debated slowing the pace of asset purchases or end them later this year.
On Wednesday, the dollar hit a four-year high of 99.88 yen, the euro climbed as far as 130.57 yen, its highest since January 2010, and the Aussie dollar soared to 105.26 yen, the highest since November 2007.
The yen's weakness has been compounded by speculation that Japanese investors will actively buy foreign bonds for higher returns as the BOJ's aggressive reflationary policy pushed Japanese government bond yields sharply lower. In particular, European sovereign debt yields have been falling on such views.
But there has been no tangible evidence so far supporting the view that the BOJ's latest move is causing a capital flight out of Japan.
Finance Ministry's weekly data showed Japanese investors sold a net 1.14 trillion yen of foreign bonds in the week to April 6, eight times the amount sold a week before.
Mitsui Life Insurance, Japan's fifth-largest life insurer, suggested it will keep its allocations more or less unchanged this fiscal year.
Japan's Kokusai Asset Management, the manager of the country's biggest mutual fund, said it will retain a high exposure to the United States but has no plans to sharply increase its exposure to U.S. debt.
"Which Japanese investor is affected by the BOJ's stimulus is key" in gauging capital outflows from Japan, said Osamu Takashima, chief FX strategist at Citibank.
Life insurers and pension funds, rather than retail investors, are affected the most as the BOJ aims to push down yields of longer-dated bonds, which are invested heavily by these institutionals, he said.
"With the U.S. yield curve flattening recently, there may come a point when hedged foreign bond investment no longer works and prompt insurers to take full currency risks," he said.
Spot gold was up 0.1 percent but still near $1,550 an ounce, after falling 1.5 percent on Wednesday, its biggest one-day drop in 1-1/2 months. The Fed's minutes and Cyprus's plan to sell its gold reserves to raise cash undermined sentiment.
U.S. crude futures eased 0.2 percent to $94.45 a barrel while Brent inched down 0.1 percent to $105.74.
(Additional reporting by Somang Yang in Seoul China Economics Team in Beijing; Editing by Richard Borsuk)