Asia report: Abenomics expectations lead markets higher

Markets in Asia finished higher on Wednesday, extending a rally among global markets which saw US indexes reach records on Tuesday, with investors looking for further easing from Japan’s re-elected administration and a sense of direction from politicians in the UK.

Japan’s Nikkei 225 finished up 0.84% at 16,231.42, while the smaller Topix added 1.13% to 1,300.26.

Stocks in the country were pushed higher by a weaker yen, with investors expecting further fiscal and monetary easing after Prime Minister Shinzo Abe and his coalition won the House of Councillors elections in a landslide at the weekend.

Abe promised a new round of fiscal stimulus and spending following the victory, part of his trademark “Abenomics”, with analysts expecting the Bank of Japan to increase its policy spending.

The yen turned slightly stronger as Japanese traders went to bed, however, with it last being 0.32% ahead on the greenback at JPY 104.35 per $1.

Its weakness during the day helped many major exporters - Nissan was up 1.1%, Toshiba added 2.2% and Toyota closed 3.4% higher, though Sony fell 2.13%.

Nintendo shares fell 4.42%, having gained 53% over the three previous sessions after the release of its runaway success augmented reality mobile game Pokemon Go.

Analysts were mixed on the impact the game will have on Nintendo’s earnings - the game is free to download, relying on players making small in-app transactions as they progress through the game.

“We view Animal Crossing and Fire Emblem, slated for fall 2016, and Zelda for mobile possibly coming in spring 2017, as the real big hitters to drive Nintendo to score high in mobile,” said Deutsche Bank’s Han Joon Kim in a note, which rated Nintendo at ‘buy’.

On the mainland, the Shanghai Composite Index added 0.36% to 3,060.21, while the smaller Shenzhen Composite was 0.82% higher at 2,041.66.

Hong Kong’s Hang Seng Index was up 0.46% to 21,322.37 at the close, while in South Korea the Kospi gained 0.72% to 2,005.55.

Political concerns in the UK eased on Tuesday, helping to calm market sentiment, as incumbent Home Secretary Theresa May was poised for the post of Prime Minister, succeeding David Cameron.

She was being sent straight to Downing Street without so much as a party ballot, after her running opponent Andrea Leadson dropped out of the race at the beginning of the weak.

The quick-change act from Cameron to May eased concerns that the UK was without a captain or sense of direction in the wake of its vote to leave the European Union.

“After being faced with the prospect of a major slowdown in global activity in the wake of the Brexit vote, governments and central banks worldwide are now expected to do their utmost to reassure markets and provide stimulus,” said IG market analyst Angus Nicholson.

Despite the relative calm in the markets, there was still the question of Article 50 and when the UK would trigger the Lisbon Treaty clause, kicking off the formal process for leaving the European Union.

Oil prices were down during Asian trading, with Brent crude last off 1.7% at $47.66 per barrel and West Texas Intermediate losing 1.39% at $46.16.

In Australia, the S&P/ASX 200 added 0.66% to finish at 5,388.50, with the energy, financials and materials subindexes leading the gains.

Miners were mostly higher after a 6% rise in iron ore prices to $58.80 per tonne overnight.

BHP Billiton added 3.26%, Fortescue Metals was up 5.52% and Rio Tinto was ahead 2.79%.

New Zealand markets went against the regional grain, with the benchmark S&P/NZX 50 losing 0.2% to 7,064.31.

Telecommunications operator Spark led the index lower, dropping 3.7%.

The down under dollars were both weaker against their US cousin, with the Aussie off 0.18% at AUD 1.3143 per $1 and the Kiwi losing 0.23% to NZD 1.3730.