Asia-Pacific stock rose Monday, as global equities continued to build on recent gains as markets recover from their start-of-the-month slump.
There were wide gains of at least 0.5% for Asia-Pacific stock indexes. The rebound allowed benchmarks in Australia and Singapore to move back into positive territory for February. But indexes in Japan, Hong Kong and India are among those markets that entered Monday’s trading down at least 4% for the month.
Investor sentiment, said Vishnu Varathan, a senior economist at Mizuho Bank in Singapore, is being broadly helped by the Federal Reserve’s semiannual monetary-policy report to Congress, which was released Friday.
The report signaled that the Fed wasn’t worried about the volatility in financial markets earlier this month and remained on track to gradually raise interest rates. This indicated to investors that the “game plan hasn’t changed substantially,” Varathan said.
The day’s biggest advance was seen in Shenzhen, which had experienced some of the biggest declines during the recent global markets swoon. The Shenzhen Composite Index 399106, +2.24% jumped 2.3%, a sixth-straight gain, rising some 8% in that time. The market was likely affected Monday by Chinese regulators again putting off a revamp that would make it easier for companies to sell shares on the country’s stock exchanges.
Shenzhen’s stock market is often put under pressure when the number of initial public offerings increases.
Meanwhile, China’s Communist Party has proposed the elimination of the constitutional cap on presidential terms, setting the stage for President Xi Jinping to rule indefinitely. “By all means, lament the lack of political debate in China,” said Rob Carnell, ING’s head of Asia research, “but from an investment perspective, there are some upsides.”
Japan’s Nikkei NIK, +1.19% rose 1.2%. That was despite fresh strength for the yen USDJPY, -0.13% after Bank of Japan Gov. Haruhiko Kuroda reiterated to parliament that there is no plan for another comprehensive review of the central bank’s current policy efforts and that it continues to target getting inflation to 2%.
The stronger yen is likely hurting the BoJ’s efforts to fuel inflation. Bank of America Merrill Lynch estimates that for every 5% drop for the dollar against the yen, Japan’s core inflation rate is pushed down about 0.1 percentage point. “Any further yen appreciation could pose a downside risk” to the price outlook, the investment bank said.