Asian stocks were on a roll Wednesday, with Japan’s Nikkei 225 index at the epicenter of the monstrous rally, as investor confidence got a boost from the strong rally in offshore markets.
Reopening after a long weekend, major US averages recovered from its second-worst week for the year, rallying more than 2 percent each overnight.
In Europe, equity markets finished more than 1 percent higher, buoyed by positive data out of the region.
“European equities advanced over 1 percent, with the risk-on mood extending to the U.S. markets. After returning from a long weekend, U.S. stocks saw a strong rally, accompanied by sales in U.S. treasuries. It seemed there is now some clarity in the risk markets, after a nerve-wrecking start to the week,” IG’s market strategist Bernard Aw wrote in a note.
“I am expecting markets across Asia to go into risk-on mode today,” he added.
Nikkei soars 7.7%
The Nikkei index at the Tokyo Stock Exchange staged a spectacular comeback, a day after crashing 2.4 percent to erase all gains made this year, thanks to hopes for more growth-supportive policies in the Asian economic giant.
Steadily widening its gains throughout the trading session, the Tokyo bourse eventually ended with its largest one-day gain since October 2008, settling at one-week high of 18,770.5, according to Reuters data.
Earlier in the day, Prime Minister Shinzo Abe told a meeting of investors that he would seek to lower the corporate tax rate by at least 3.3 percentage points next financial year, Reuters reported. Analysts say Abe’s comments bode well for the outlook for Japan Inc and helped to lure investors back into the market.
Index heavyweights, financials and brokerage houses were among the top performers. Fast Retailing rocketed 10.1 percent, while SoftBank and Fanuc powered up 4.5 and 8.4 percent respectively.
Amid a weaker yen, which traded at 120.3 versus the U.S. dollar, export-oriented stocks such as Toyota Motor, Nissan, Suzuki Motor and Honda Motor elevated more than 6 percent each.
Toshiba shares erased losses to close up 1 percent. Earlier in the session, shares plunged as much as 4.4 percent to hit their lowest level since November 2013, after CLSA cut its rating to ‘sell’ from ‘buy’ and reduced its earnings per share estimate and profit outlook.
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To be sure, there are analysts who remain unimpressed by the Nikkei’s stellar rebound.
Eric Liu, partner and head of research at Vanda Securities, told CNBC: “What is happening in Japan is a snap-back similar to what we saw in developed markets such as the U.S. in the last four days. We think this is animal spirits and simply an unwinding of trades, rather than anything fundamental.”
In addition, Liu said Japanese shares are “one of the worst markets to own in the fourth quarter.”
Chinese markets rise
Share markets in the mainland extended the previous day’s gains amid news that the government may be stepping up on fiscal policy to support the economy; the benchmark Shanghai Composite index closed up 2.32 percent.
Market watchers say state-backed buying, which helped to underpin a late-day swing in the mainland markets on Tuesday, also restored battered investor confidence.
“Usually when we see these [swift] rallies in financial and energy stocks, most of the time it’s by the Chinese government. They do that to make the index look good and restore investors confidence,” Jackson Wong, associate director at United Simsen Securities Limited, told CNBC. “[Today] the rally has continued because investors are more confident.”
Among China’s other indexes, the blue-chip CSI300 Index and the smaller Shenzhen Composite advanced 2 and 3.3 percent, respectively.
Hong Kong’s Hang Seng index jumped 3.7 percent, with Cheung Kong Infrastructure Holdings up 4.3 percent following news that the infrastructure arm of Li Ka-shing’s conglomerate is planning to buy the rest of Power Assets Holdings it doesn’t already own. Shares of Power Assets went up 6 percent.
Meanwhile, the China Enterprises Index, which tracks Chinese companies listed in Hong Kong, leaped 5.1 percent.
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According to a statement by the Ministry of Finance late Tuesday, China will accelerate major construction projects, bring in private financing through increased use of the public private partnership (PPP) model, standardize the management of local government debt and reform taxes.
Meanwhile, the National Development and Reform Commission (NDRC) approved two railway projects on Tuesday with a total value of nearly 70 billion yuan ($ 11 billion), the latest move to support infrastructure projects to re-energize sputtering growth.
Authorities also said late Monday it would remove personal income tax on dividends for shareholders who hold stocks for more than a year. According to Bert Hofman, country director for China, Mongolia and Korea at The World Bank, this move encourages longer-term investment in equities which will likely pave the way for more stability in the market.
ASX gains 2.1%
Australia’s S&P ASX 200 index extended its winning streak to a second straight session, with financials leading the charge.
All four major lenders surged more than 3 percent each, while Macquarie Group bounced up 3.8 percent.
In the energy space, Santos continued to attract hefty buy orders, up 5.9 percent, on the back of news that it could become Woodside Petroleum’s next target if the company’s $ 8 billion all-share takeover plan for Oil Search fails to gain traction.
Shares of Oil Search sagged 0.6 percent, a day after rallying 17.3 percent on the back of the takeover bid. Market bellwether BHP Billiton also bucked the uptrend, down 0.2 percent, after going ex-dividend.
Kospi rises 3%
South Korea’s Kospi index ended a three-day slump, while the won recovered from Tuesday’s five-year low to trade at 1,188.1 against the U.S. dollar in Asian trade.
Investors picked up pharmaceutical shares that were sold off in the previous session, with the sub-index for pharmaceutical shares advancing 5.3 percent.
Other gainers included midsized builder Dongbu Corp. which jumped 30 percent on the back of local media reports that it recently sent a letter explaining the sales process and qualities of the firm to attract potential Chinese investors. The index’s top weighted stock Samsung Electronics closed up 1.4 percent, while chipmaker SK Hynix and steelmaker Posco rocketed 3.6 and 5.5 percent respectively.
On the domestic data front, the country’s unemployment rate for August came in at a 7-month low of 3.6 percent, a slight improvement from July’s 3.7 percent, as the pace of hiring in other services recovered from the deadly MERS outbreak.
Taiex up 3.6%
Taiwan’s weighted index scaled 3.57 percent to a three-week high on the back of bargain hunting and as investors rushed into tech-related shares.
Large-cap chipmaker Taiwan Semiconductor Manufacturing Company (TSMC) rallied 4.9 percent.
Among Apple’s Taiwanese suppliers, Catcher Technology climbed 7.1 percent, while Hon Hai Precision and Pegatron closed up 3.3 and 4.4 percent respectively. The iPhone maker is due to hold a high profile event on Wednesday in which the company is expected to release a new cycle of products.