Asia report: Stocks rise as Bank of Korea lifts rates by 25bp

Stocks in Asia were mostly in the green at the end of trading on Thursday as investors looked ahead to the US Fed’s Jackson Hole symposium later in the global day, with Hong Kong trading interrupted by a typhoon warning.

In Japan, the Nikkei 225 was up 0.58% at 28,479.01, as the yen strengthened 0.51% against the dollar to last trade at JPY 136.42.

Uniqlo owner Fast Retailing was down 0.26%, while robotics specialist Fanuc managed gains of 0.11% and tech investing giant SoftBank Group advanced 0.39%.

The broader Topix index was 0.48% firmer by the end of trading in Tokyo, settling at 1,976.60.

On the mainland, the Shanghai Composite was ahead 0.97% at 3,246.25, and the technology-centric Shenzhen Component eked out gains of 0.06% to 12,104.03.

South Korea’s Kospi jumped 1.22% to 2,477.26, while the Hang Seng Index in Hong Kong surged 3.63% to 19,968.38.

Trading in the special administrative region was earlier paused as the city fell under a typhoon warning, before resuming later in the afternoon as the danger passed.

Chinese technology plays were on the front foot by the end of the interrupted session, with Alibaba Group up 8.75%, JD.com adding 11%, Meituan ahead 8.04%, NetEase rising 5.25%, and Tencent Holdings closing 4.84% firmer.

Seoul’s blue-chip technology stocks were in the green as well, with Samsung Electronics up 1.19% and SK Hynix 0.97% firmer.

The Bank of Korea tacked 25 basis points onto its benchmark policy rate earlier in the session, taking it to 2.5%, in a bid to tackle inflation that was currently near a 24-year high.

South Korea’s central bank also raised its inflation expectations for the year to 5.2% from a previous 4.5%, and trimmed its expectations for economic growth to 2.6% from 2.7%.

“The BoK views further hikes as necessary, given its inflation forecasts, even while acknowledging downside risks to growth and high uncertainty,” said Craig Botham at Pantheon Macroeconomics.

“Governor Rhee said in his briefing that 25-basis point increments were the most likely path - implying that rates will not exceed 3% this year - and that the base rate should rise above the upper-range of neutral if consumer price index (CPI) inflation remains high.

“Inflation above 5% is seen as particularly dangerous, weighing on consumer sentiment and becoming harder to tackle.”

Botham added that in a note of caution, the governor also said that further discussion would be needed towards the end of the year due to the current climate of high uncertainty.

“Given the challenges we see facing global growth - particularly painful for an export-dependent economy - we expect that discussion to produce a prolonged pause.

“Inflation is also expected to peak in the third quarter, though not retreat dramatically, which should provide a measure of comfort.

“We see a good chance that rates will peak at 2.75%, with one last hike at the October meeting.”

Oil prices were mixed as the region went to bed, with Brent crude futures last up 0.13% on ICE at $101.37 per barrel, while West Texas Intermediate was 0.03% weaker at $94.86 on NYMEX.

In Australia, the S&P/ASX 200 added 0.71% to 7,048.10, while across the Tasman Sea, New Zealand’s S&P/NZX 50 was the region’s odd one out, slipping 0.24% to 11,627.14.

Both of the down under dollars were stronger on the greenback, with the Aussie last ahead 1.07% at AUD 1.4319, and the Kiwi advancing 0.97% to NZD 1.6006.

Reporting by Josh White at Sharecast.com.