By Chikako Mogi
TOKYO (Reuters) - Fresh data underscoring a recovery in China and Wall Street's record closing overnight boosted Asian shares on Thursday, while gold bounced off lows on worries about rising tensions in the Korean peninsula.
The yen marked time before testing fresh lows against major currencies as the Bank of Japan's bold stimulus moves continued to kick in.
U.S. stock futures were down 0.1 percent, pointing to a soft Wall Street open after the Dow Jones industrial average and the Standard & Poor's 500 Index both ended at historic highs on Wednesday.
The MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8 percent, led by cyclical sectors such as technology, which advanced 1.5 percent.
Hong Kong shares led their peers with a 0.8 percent rise.
Data on Thursday showed Chinese banks made 1.06 trillion yuan of new local currency loans in March, 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.
Improving growth prospects in the world's second-largest economy, coupled with solid equities performance in the U.S., helped offset headwind developments events such as a unforeseen and severe drop in Australian employment and a surprise decision by the Bank of Korea to ignore the clamour for a rate cut and keep interest rates steady.
Australian shares rose 0.7 percent despite the local jobs data, which nevertheless pushed the Australian dollar down 0.2 percent to $1.0516 as investors priced in a greater chance of a cut in interest rates.
South Korean shares rebounded from earlier losses to inch up 0.3 percent. The Korean won briefly extended gains as the Bank of Korea opted to further assess the effect of the government's stimulus steps and tensions with North Korea.
"The BOK is focusing on ways to ensure that the money circulates ... I think this may be better as this is in line with global trends," said Ryu Yong-seok, a strategist at Hyundai Securities.
South Korea and the United States remained on high alert for any North Korean missile launch on Thursday as the hermit kingdom turned its attention to celebrating its ruling Kim dynasty and appeared to dial down rhetoric of impending war.
Sentiment was buoyant across the region, hoisting shares in
Malaysia to a record high, following in steps with other Southeast Asian shares including Indonesia and the Philippines which marked lifetime peaks earlier in April.
The Nikkei stock average percent after earlier hitting its highest since July 2008.
JAPAN ENIGMA
The yen remained near recent lows. The dollar was at 99.58 yen and the euro traded at 130.09 yen, while the Aussie was at 104.74 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.
There has been no tangible evidence so far supporting the view that the BOJ's latest move is prompting Japanese investors to rush to foreign assets, but that may change if returns on Japanese bonds continue falling.
The 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, as they cashed in gains at the start of Japan's fiscal year.
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.
Noting 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 most affected as the BOJ aims to push down yields of longer-dated bonds, which are heavily invested in by these institutions.
"With the U.S. yield curve flattening recently, there may come a point when hedged foreign bond investment no longer works and prompts insurers to take full currency risks," he said.
Spot gold was up 0.1 percent at $1,559.86 an ounce.
U.S. crude futures fell 0.3 percent to $94.38 a barrel while Brent eased 0.2 percent to $105.60.
(Additional reporting by Somang Yang in Seoul China Economics Team in Beijing; Editing by Richard Borsuk and Eric Meijer)
