Asia: Nikkei ends on high, China boosted by government spending plans

Asian stocks continued their late rally as the year nears its end, following higher finishes for European and US indices.

In its last trading day of the year, Japan's Nikkei closed out 2015 at its highest annual level for 19 years and its fourth annual rise in a row, rising 0.27% to 1,753.63 on the day and 9.07% over the last 12 months.

Although most investors are on holiday, trading was being lifted on some optimism that Japan's economy will recover further in 2016 thanks to improved corporate investment and private consumption, though growth will remain less than speedy.

Chinese equities were also on the front foot, with the Shanghai composite index up 0.26% on the day and 3.7% for the month.

China's yuan fell against the US dollar fell for the third straight day to its lowest level in more than four years.

After the US interest rate rise, investment flows have been driven into the US but there was, People’s Bank of China vice governor Yi Gang said, no basis for continued yuan depreciation, with China capable of keeping the currency stable at a reasonable level, with China's still strong economic growth and foreign exchange reserves major factors that would underpin the currency.

However, increasing arbitrage from the widening gap between the currency’s exchange rates in China and abroad has led to authorities suspending at least two foreign banks from conducting some cross-border yuan business until late March, according to sources cited by Bloomberg.

The banks have been banned by the PBoC from settling offshore clients’ yuan transactions in the onshore market until late March, the sources said.

Elsewhere, Reuters cited PBoC policy advisers who suggested China could run its biggest budget deficit in half a century next year as increased government spending is employed to boost the slowing economy, after a year of monetary policy failed to create the desired results.

The government has been advised to expand its budget deficit to roughly 3% of GDP in 2016 from a target of 2.3%, which was said to help ease the pain from plans to tackle oversupply and debt.