Asia report: Markets begin post-Brexit bounce back

Major markets in Asia ended higher on Monday, in a turnaround from Friday’s global selloff after the UK surprised markets by choosing to leave the European Union.

Japan led the region’s gains, with the Nikkei 225 adding 2.39% to 15,309.21, after it plummeted 7.92% on Friday amid fresh strength in the yen.

The yen was last 0.22% stronger at JPY 101.99 per USD, having traded choppily throughout the session.

Prime Minister Shinzo Abe told Finance Minister Taro Aso on Monday to keep an eye on currency markets and take action to stabilise the yen if necessary.

The comments were made at an emergency meeting between the government and the Bank of Japan, it was reported.

Carmakers were under pressure as Brexit’s impact on the yen made exports less competitive, with Mazda losing 9.67%, Nissan down 2.53% and Toyota off 1.7%, though Honda added 0.53%.

“We estimate that the aggregate operating profits of Japanese automakers will be reduced by JPY84.9 billion for each JPY1 of yen strengthening versus the US dollar, JPY9.7 billion for the same versus the euro, JPY1.5 billion for the pound sterling, JPY11.9 billion for the Australian dollar, and JPY5.4 billion for the Canadian dollar,” said Nomura analyst Masataka Kunugimoto.

Mazda in particularly was down after Nomura lowered its rating on the stock to ‘neutral’.

On the mainland, the Shanghai Composite Index closed up 1.44% at 2,895.52 and the Shenzhen Composite was up 2.42% at 1,946.69.

The People’s Bank of China guided renminbi weaker against the dollar before markets opened, fixing it at CNY 6.6375 per USD.

Beijing allows the onshore yuan to trade 2% above or below the loose peg it sets.

In South Korea, the Kospi added 0.08% to finish at 1,926.85, while Hong Kong’s Hang Seng Index closed down 0.16% to 20,227.30.

Oil prices were ahead during afternoon trading in Asia, with Brent crude last ahead by 0.37% at $48.59 per barrel and West Texas Intermediate up 0.06% at $47.67.

Analyst consensus was that markets were looking at short-term volatility after the Brexit vote, reacting immediately and sharply after the result became clear on Friday morning.

IG chief market strategist Chris Weston said that risks were building on Monday, and that buying seen during Asian trading “suggests most in the market feel we are seeing a short-term shock than something more protracted and sinister.”

In Australia, the S&P/ASX 200 closed 0.47% higher at 5,137.23, after recording losses of almost 1% earlier in the session.

The weighty financials subindex ended down 0.24% with the major Australasian banks closing mixed - Australia and New Zealand Banking Group was down 0.73%, Commonwealth Bank of Australia added 0.32%, National Australia Bank was down 0.41% and Westpac ended 0.14% higher.

Sydney stocks with high exposure to Britain remained under pressure, with Henderson Group finishing down 15.92% and Clydesdale Bank off 9.41%.

New Zealand’s benchmark S&P/NZX 50 added 0.3% to 6,686.92, as the first market open for the week after Friday’s Brexit panic.

Newspaper publisher and broadcaster New Zealand Media and Entertainment dropped 20% upon listing, having been spun onto the market by its former owner APN News & Media.

The down under dollars were both weaker against the greenback, with the Aussie losing 0.51% to AUD 1.3459 and the Kiwi last 0.78% weaker at NZD 1.4133.