Asia report: Stocks rise as confidence returns to financial sector

Stock markets in Asia ended higher on Friday, driven by positive sentiment in the banking sector following developments on Wall Street.

Late in the US session on Thursday, 11 banks including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo deposited a total of $30 billion into the ailing First Republic Bank, alleviating concerns over the bank's liquidity.

Last week, Silicon Valley Bank collapsed amid a liquidity crisis, and Credit Suisse faced similar concerns in Europe earlier this week.

However, depositors of Silicon Valley Bank were made whole by a 'backstop' implemented by the Federal Reserve system in the US, while concerns over Credit Suisse were soothed by a CHF 50 billion loan provided by the Swiss National Bank.

“Asian stocks traded in the green heading into the weekend, after the Credit Suisse backstop provided by the SNB and the US bank bailout of First Republic,” said TickMill Group market analyst Patrick Munnelly.

“A team of the tier one investment banks in New York stepped up to deposit $30bln into the beleaguered lender, reminiscent of the original namesake JPMorgan's move in the 1900’s.”

Munnelly noted that the Nikkei 225 nudged above 27,000, as the Hang Seng and Shanghai Composite, both traded around 1% higher into the weekend and Baidu notching up double-digit returns.

“[That], coupled with another round of liquidity provision from the People’s Bank of China, sees the market mood ending the week on a buoyant tone after the turbulence witnessed at the start of the week.”

Markets green across the region as rosy sentiment returns

In Japan, the Nikkei 225 rose 1.2% to 27,333.79, while the Topix index climbed 1.15% to 1,959.42.

Tobu Railway led gains on Tokyo’s benchmark, surging 4.44%, followed by Daiichi Sankyo, up 3.6%, and Sony, up 3.52%.

Mazda Motor Corporation fell 1.72%, however, after the Japanese automaker revealed it had nominated Masahiro Moro as its new president and chief executive officer, subject to approval from shareholders and its board.

Moro, who was currently chairman and CEO of Mazda’s North American operations, was set to replace Akira Marumoto.

China's Shanghai Composite index added 0.73% to 3,250.55, while the Shenzhen Component rose 0.36% to 11,278.05.

ArcSoft Corporation and Foxconn Industrial Internet were among the top gainers in Shanghai, rising 13.34% and 10.04%, respectively.

Hong Kong's Hang Seng Index ended 1.64% higher at 19,518.59, with Baidu, SMIC and Country Garden Holdings among the biggest gainers, rising 13.67%, 9.61%, and 7.69%, respectively.

South Korea's Kospi index rose 0.75% to 2,395.69, with SK Hynix and Kogas leading gains, rising 6.33% and 5.64%, respectively.

In Australia, the S&P/ASX 200 added 0.42% to 6,994.80, with Liontown Resources and Paladin Energy among the top gainers, rising 8.2% and 6.9%, respectively.

Finally, in New Zealand, the S&P/NZX 50 rose 0.23% to 11,725.62, with Ryman Healthcare and Kiwi Property leading gains, rising 5.07% and 4.6%, respectively.

In currency markets, the yen strengthened 0.84% on the dollar to last trade at JPY 132.61, while the Aussie gained 0.55% to AUD 1.4942, and the Kiwi advanced 0.72% on the greenback to change hands at NZD 1.6021.

Oil prices also rose slightly, with Brent crude futures last up 0.15% on ICE at $74.81 per barrel, and the NYMEX quote for West Texas Intermediate rising 0.45% to $68.66.

China trims reserve ratio for banks after slight rise in house prices

In economic news, China's central bank, the People's Bank of China, announced that it would cut the reserve requirement ratio (RRR) for all banks, except those with a 5% ratio, by 25 basis points from 27 March.

The decision was made earlier than expected and was aimed at increasing liquidity in the banking sector.

It marked the first RRR cut of the year, following a similar 25-basis point cut in December.

The central bank noted that the RRR cut reflected its intention to use precise and forceful policies to support the economy and improve services for the real economy.

The PBoC pledged to continue making precise policy adjustments throughout the year to ensure the stability and growth of the economy.

“The timing of the cut is a little surprising given the strength of recent data but it is consistent with recent comments by PBoC governor Yi Gang when he highlighted that cuts in the RRR would be an effective way to add liquidity,” noted analysts at TD Securities.

“This is unlikely however, to translate into a cut in Loan Prime rates next week in our view but it does add further, albeit limited support to the economy.

“Renminbi trimmed gains on the news, but overall we expect the currency to track dollar gyrations, with some weakness on a trade weighted basis likely.”

Elsewhere in China, house prices rose 0.3% in February compared to January, but were 1.2% lower year-on-year according to data from the National Bureau of Statics and Refinitiv.

It marked the fastest pace of monthly home price growth since July 2021.

The official data showed that 55 cities saw rises in new house prices in February, compared to 36 in January.

“The Chinese housing market upturn is likely to be drawn-out, regionally uneven and bumpy, but it is nonetheless underway,” said Pantheon Macroeconomics chief China economist Duncan Wrigley.

“Market confidence is returning after the removal of zero-Covid policy, helped by policymakers prioritising domestic demand expansion this year.

“Improved liquidity at high-quality developers provides reassurance to people that pre-sale units bought from these developers, at least, will be completed.”

In Japan, the Japan Center for Economic Research hiked its consensus forecast for the economy's wage growth in 2023 to 3.05% in March, from 2.85% in January.

The survey, which came on the heels of Japan’s annual ‘shunto’ wage negotiations, would mark the strongest growth seen in Japan since 1994.

Most respondents to the survey revised their estimates on both base bay and overall wages upwards.

Indonesia's central bank meanwhile maintained its seven-day reverse repurchase rate at 5.75%, and its lending rate at 6.5%, in line with its monetary policy stance to keep a lid on inflation and expectations.

The central bank was targeting core inflation to one percentage point either side of 3% in the first half of this year, with headline inflation aimed to return to the same range in the latter six months of 2023.

Finally, New Zealand’s government announced it would ban TikTok on devices with access to the parliamentary network, amid cybersecurity concerns.

The decision was made by the Parliamentary Service in Wellington after both the US and the UK announced plans to ban or restrict the social video app on government devices.

TikTok is owned by ByteDance, which is privately held and backed by funds including Kohlberg Kravis Roberts, SoftBank Group, Sequoia Capital, General Atlantic and Hillhouse Capital.

It is headquartered in mainland China, with a small share and board seat linked to the Cyberspace Administration of China.

Reporting by Josh White for Sharecast.com.