Asia Pacific share market advanced on Tuesday, 07 June 2016, buoyed by bullish commodities market, climbing oil prices and the delayed prospect of a U.S. interest-rate increase in the wake of comments from Fed Chair Janet Yellen on Monday and a poor May jobs report on Friday.
US Federal Reserve Chairwoman Janet Yellen said in a speech overnight that short-term interest rates wouldn't be raised until there was more clarity about the US economic outlook. Yellen's remarks followed monthly job report for May 2016 that raised concerns over the ability of the economy to absorb a rate hike as early as June. The Fed chief said last month's jobs report was disappointing and bears watching, though she gave a largely upbeat assessment of the US economic outlook, warning against attaching too much significance to the payrolls data in isolation.
A delay in interest rate increases from the Fed would slow capital flight from emerging markets. Investors in emerging markets have been worried that higher interest rates in the US will drain liquidity from emerging markets and redirect it to developed economies. The Federal Open Market Committee (FOMC) next undertakes monetary policy review at a two-day meeting on 14-15 June 2016. The Fed has kept the benchmark fed funds rate unchanged after raising it for the first time in nearly a decade in December 2015.
Yellen remained relatively optimistic about the overall US outlook and said the Fed would hike rates, she gave no fresh hints about the timing of its next move and called last month's US jobs data disappointing''. She also echoed other Fed officials in saying that the UK referendum this month on whether to stay in the European Union would be a factor in the Fed's decision making. She said a vote for Brexit could have a significant economic impact.
The US dollar was subdued, trading not far from four-week lows against a basket of currencies, after Federal Reserve Chair Janet Yellen walked a fine line and did not specify whether the Fed will raise rates over the summer months. The dollar index was flat at 93.891, within sight of Monday's low of 93.745, its weakest since May 11. It had come under pressure since the US non-farm payrolls report on Friday showed the slowest job growth in more than five years in May, quashing expectations for a near-term rate hikes.
Gains on the regional bourses were, however, limited on worries about the outcome of the June 23 "Brexit" referendum. Investors and policy-makers have warned a British exit from the EU would hurt the global economy and roil financial markets. Tuesday's poll results soothed some fears, but uncertainty remained high.
Commodity prices continued their ascent after the U.S. dollar's drop Friday against its major peers. A weaker dollar lifts commodities because they are priced in the U.S. currency, effectively making them cheaper to buy for those holding other currencies. This leads to buyers purchasing more of the commodities, pushing prices higher. Overnight, iron-ore prices gained 2.1%, copper rose 0.2% and gold was up 0.1%
Among Asian bourses
Australia Market extends gain as miners
Australian share market ended higher on the back of strength in energy and materials stocks. But gains were limited as many traders were disappointed that the RBA statement offered no hints on further easing, which led them to exit earlier bets on an imminent rate cut. At close of trade, the benchmark S&P/ASX 200 index advanced 10.60 points, or 0.2%, to 5371. The broader All Ordinaries grew 10 points, or 0.18%, to 5441. Rising stocks outnumbered declining ones on the Australia Stock Exchange by 518 to 496 and 339 ended unchanged. The S&P/ASX 200 VIX, which measures the implied volatility of S&P/ASX 200 options, was down 2.46% to 16.769.
Shares of big miners were sharply higher after iron ore prices jumped past $US50 and oil rallied 2%. BHP Billiton bounded 3.4% to A19.87, Rio Tinto rose 2% to A$46.13 and Fortescue soared 3.4% to A$3.32. In energy, Santos jumped 4% to A$4.62, Origin climbed 1.8% to A$5.82 and Woodside advanced 1.7% to A$27.52.
Energy company LNG added 13% to close at $0.820 after being questioned by the ASX over its jump in price. The gas producer said it didn't know why its shares are up more than 40% in a week.
Mayne Pharma closed 22.2% higher at $1.595 after the company got US approval to sell a generic version of a heart drug.
Nikkei ends 0.58% up
The Japan share market finished higher, as buying was triggered by strong U.S. stocks overnight and the yen's depreciation against the U.S. dollar. Gainers were led by mining, oil and coal products and miscellaneous product issues. The 225-issue Nikkei average advanced 95.42 points, or 0.58%, to end at 16675.45. The Topix index of all first-section issues rose 8.34 points, or 0.63%, to 1,340.77. Rising stocks outnumbered declining ones on the Tokyo Stock Exchange by 1178 to 656 and 163 ended unchanged. The Nikkei Volatility, which measures the implied volatility of Nikkei 225 options, was down 4.00% to 26.41.
Energy shares advanced after crude futures jumped 2.2% on Monday, with Inpex Corp, Japan's largest oil and gas explorer, rising 4.4%. Airlines were the biggest losers among the Topix's 33 industry groups as Japan Airlines Co. fell 2.4% on concern fuel costs will raise on rising crude prices.
Diaper-maker Pigeon Corp. surged 14% after net income in the first quarter came better than expected and the company affirmed its full-year operating-profit forecast.
Pioneer Corp. advanced 0.9% on reports the audio-equipment maker is considering paying a dividend for the first time in a decade. The payment could be several yen per share and would be for the fiscal year ending March 2018, according to the report.
Hotto Link Inc. jumped by 16% after announcing it will work with Tencent Holdings Ltd. to expand the Shenzhen-based company's WeChat Pay service in Japan. Visitors from China accounted for about a quarter of all tourists to Japan last year.
China Stocks end higher
Mainland China stock market advanced on hopes that Beijing will accelerate its long-promised reforms for bloated and inefficient state enterprises. Meanwhile, sentiments were buoyed by growing hopes that MSCI will include Chinese shares in its emerging market index in a decision next week. But gains were marginal, on caution ahead of a as a flurry of economic data in coming weeks that will paint a clearer picture of the Chinese economy, and a long weekend which starts on Thursday. The CSI300 index of the largest listed companies in Shanghai and Shenzhen declined 0.05%, to 3177.05, while the Shanghai Composite Index added 0.07%, to 2936.04 points.
China's finance minister Lou Jiwei had said on Monday that the country has room to expand its 100 billion yuan ($15.23 billion) assistance plan for laid-off workers in industries hit by cuts in excess capacity, as Beijing pushes economic restructuring.
FAW Car and FAW Xiali, both controlled by state-owned FAW Group, slumped for their second day, after the two automakers said they would postpone a restructuring plan aimed at eliminating conflicts of interests within the group.
Hong Kong Market ends higher
The Hong Kong stock market finished higher, as risk appetite buying spurred by following rally on the global markets after Federal Reserve chair Janet Yellen signaled the U.S. central bank may raise interest rates gradually later this year. The benchmark Hang Seng Index advanced 298.02 points, or 1.42%, to 21328.24 points. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, rose 138.95 points, or 1.57%, to 9004.30. Turnover increased to HK$67.1 billion from HK$51.9 billion on Monday.
Market heavyweights were higher. China Mobile (00941) put on 3.35% to HK$91.1, while HSBC (00005) gained 1.5% to HK$50.85. Galaxy Ent (00027) dipped 2.55% to HK$24.85, making itself the largest blue-chip loser, after Goldman Sachs downgraded its rating of the stock.
Greatwall Motor (02333) surged 5.43% to HK$6.6 after JP Morgan raised its target price and rating for the stock. Geely Auto (00175) and Brilliance China (01114) put on 3.83% and 1.01% to HK$4.34 and HK$8.
Indian Market gains
The Reserve Bank of India's (RBI) indication after a policy review that interest rate cut may be announced if macroeconomic and financial developments favour rate cut and firmness in European stocks aided the upmove on the domestic bourses. The barometer index, the S&P BSE Sensex, rose 232.22 points or 0.87% to settle at 27,009.67. The gains for the Sensex were higher in%age terms than those for the Nifty 50 index. The Nifty rose 65.40 points or 0.8% to settle at 8,266.45. The Sensex reclaimed the psychologically important 27,000 mark. The Sensex and the Nifty, both, attained their highest closing level in more than 7 months.
Bank stocks edged higher after the Reserve Bank of India kept key policy rates unchanged after a monetary policy review. State Bank of India surged on reports that the bank is considering a proposal to hive off its stressed-loan portfolio into a separate company. ICICI Bank moved higher on reports that a foreign brokerage has issued a tactical short term buy call on the stock, citing attractive price to book value on a 1 year forward basis of ICICI Bank vis-vis Axis Bank. Shares of public sector oil marketing companies slipped after a rise in global crude oil prices. Aviation stocks fell as global crude oil prices rose.
Elsewhere in the Asia Pacific region: New Zealand's NZX50 added 0.18% to 7037.31. South Korea's KOSPI index added 1.3% to 2011.63. Taiwan's Taiex index added 1% to 8679.90. Malaysia's KLCI rose 0.7% to 1660.62. Indonesia's Jakarta Composite index added 0.8% to 4933.99. Singapore's Straits Times index rose 0.59% to 2848.09.
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