Asia report: Markets leave China behind amid liquidity concerns

The Nikkei 225 ended 2.7% higher at 17,363.62, rising for a third consecutive day of gains. It reached its highest level since 2 February, with stocks well on their way to recouping almost all of their losses sustained since the Bank of Japan adopted negative interest rates on 29 January.

“I think the most important factor for today’s yen weakness and the strength of Japan’s stock market is the rising crude-oil price. The rise in global price makes investors take on more risk,” said Soichiro Monji, general manager of economic research at Daiwa SB Investments.

The yen held relatively steady through the trading day, though was last slightly stronger against the greenback, advancing 0.08% to JPY 109.76 per US dollar.

Shares were boosted in the afternoon after former Bank of Japan deputy governor Kazumasa Iwata commented that interest rates would need to be lowered to as much at -1% from the current -0.1% if deflation is to be defeated.

There was already speculation that the central bank would introduce further easing measures next week to help boost the flagging economy.

Companies with facilities in the region affected by last week’s earthquakes were still having difficulties returning to full capacity, with strong aftershocks still shaking the area.

Drinks maker Suntory said it could take more than a month to restart its production line, though its shares rose 1.5%, suggesting unease over the disaster is starting to ease.

Markets elsewhere were mostly up, with the South Korean Kospi up 0.81% and the Hang Seng Index lifting 1.82%. Down under, the S&P/ASX 200 was up 1.09%, and the S&P/NZX 50 lifted 0.07% to another fresh all-time high.

China was the odd one out, with the Shanghai Composite Index losing 0.66%. It was a choppy trading day in the country, with fresh liquidity boosting markets but concern that Beijing could reduce its stimulus measures putting pressure on them at the same time.

“The market is still very fixated on liquidity and the easing stance” of China’s central bank, said Gavin Parry, managing director at brokerage Parry International Trading.

The People’s Bank of China announced a large injection on Thursday, buying CNY 220bn of reverse repurchase agreements.

Beijing had been injecting liquidity into the markers in similar ways already this week, trying to ease concerns about a short-term squeeze.

In the other major currencies, the Kiwi moved away from its American counterpart and was last 0.29% weaker after choppy trading to sit at NZD 1.4373 per dollar. The Aussie continued its march closer to the greenback, however, and was last ahead 0.19% at AUD 1.2805.