By Saikat Chatterjee
HONG KONG (Reuters) - Asian stocks were up in hesitant trade on Thursday, as many investors sought shelter in safe-haven assets such as the Japanese yen and government debt as they braced for Britain's vote on its fate in in the European Union.
Sterling, the cleanest way to play the "Brexit" trade, climbed to a six-month high against the dollar, cementing an impressive 6 percent rise since last week as investors squared short positions ahead of the referendum later in the day.
While two opinion polls published late on Wednesday, a few hours before voters were due to begin to cast their votes, showed the "Remain" camp nudging ahead in the closely divided campaign, trading activity in Asian hours remained erratic, thin and cautious.
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.2 percent. Many markets in Asia were flat to slightly negative. Among the big losers were the Indonesian stock market while Japan's Nikkei led gainers.
Angus Nicholson, market analyst at IG in Melbourne, said that "markets are still incredibly nervous and some sharp market moves are likely over the next 24 hours."
Various market volatility indicators edged higher in the run up to the referendum. A volatility gauge for the Hong Kong stock market has climbed to more than 25 compared to around 18 at end of December while the more popular VIX index approached its highest levels seen this year.
Investors remained largely on the sidelines ahead of the referendum as a closely fought vote meant any large positions taken before the outcome was vulnerable to being stopped out. A Bank of America Merill Lynch fund manager poll last week found investors' cash levels at their highest since November 2001.
Some investors such as George Soros expect the value of the British pound to decline by as much as 15 percent from current levels in the event of a British exit from the EU.
On Thursday, sterling was changing hands at $1.4796, after hitting $1.4847, its highest against the dollar in 2016.
The demand for the perceived safe-haven yen remained broadly intact with the dollar adding just 0.2 percent to 104.60 yen, while the euro gained 0.6 percent to 118.64 yen.
"It will be hard for the market to move until the poll results are released. The pound obviously will take centre stage. But other European currencies and particularly dollar/yen also bear watching as the pair will reflect swings in risk sentiment," said Shin Kadota, chief Japan FX strategist at Barclays in Tokyo.
Before the vote, exchanges and market regulators moved in to tighten risk management systems. Singapore's stock exchange said it has raised the amount of cash firms must pledge to cover trading positions while central banks stood by to pump in emergency cash.
The euro rose 0.4 percent to $1.13405, while the dollar index, which tracks the greenback against a basket of six rival currencies, slipped 0.1 percent to 93.479.
Government bonds held firm with ten-year Japanese bonds yielding 0.13 percent while the spread between ten and two-year debt holding firm at 95 basis points.
Crude oil prices rose after settling down more than 1 percent on Wednesday after the U.S. government reported a smaller-than-expected inventory drawdown.
Brent added 0.8 percent to $50.28 a barrel after shedding 1.5 percent on Wednesday, while U.S. crude was up 0.9 percent at $49.54 after giving up 1.4 percent in the previous session.
Spot gold plumbed a two-week low of $1,260.36 an ounce and was last down 0.4 pct at $1,261.24.
(Additional reporting by Lisa Twaronite in TOKYO; Editing by Shri Navaratnam)
