Asian stocks spike, stimulus eyed

Tokyo’s sharemarket has sharply extended its gains amid hopes for monetary and fiscal stimulus.

Stocks in Japan were on a roll for a second straight day on Tuesday, led by another surge in Nintendo on the back of global mania for its “Pokémon Go” app, and as hopes build for fresh fiscal stimulus.

Japan’s Nikkei Stock Average ended up 2.5 per cent, extending Monday’s 4 per cent gain. The yen’s continued weakening eased worries that a persistently strong currency would make Japanese exports less competitive.

The positive momentum in Japanese equities came as investor confidence rose in Prime Minister Shinzo Abe’s ruling coalition -- and its ability to execute policies -- after the coalition on Sunday increased its control of parliament’s upper house.

Anticipation was also growing that Mr Abe would soon introduce fresh fiscal stimulus to jolt the stagnant economy. This has tilted traders back to risk, particularly given the S&P 500’s advance to a record high in the US overnight.

Buying interest remained high for shares of videogame maker Nintendo, which has a minority stake in the augmented-reality game “Pokémon Go.” Nintendo added 13 per cent Tuesday in a sign of hope for its mobile-games business, after rising 25 per cent the previous session.

Elsewhere in the region, Korea’s Kospi rose 0.1 per cent and Hong Kong’s Hang Seng Index rose 1.8 per cent. China’s Shanghai Composite Index finished 1.8 per cent higher.

But the main focus was on Japan, where investors waited for details from Mr. Abe’s pledge that his cabinet would start drawing up a stimulus package on Tuesday. Speculation was also rife that the subjects discussed during a meeting on Tuesday between former US Federal Reserve Chairman Ben Bernanke and Mr Abe would include a radical measure known as “helicopter money” -- in which a central bank directly funds government spending -- which would have a big depreciating impact on the yen.

Mr Bernanke urged Mr Abe to defeat deflation, according to Abe adviser Koichi Hamada, who left it vague whether helicopter money came up.

As recently as last week, fears about repercussions from the UK’s vote to leave the European Union led investors to pile into the yen as a haven, pushing it close to the 100-to-the-dollar mark. But the yen recently weakened to 103.42 on the prospect of economic stimulus. A weaker yen typically buoys the stock market, but traders were unsure whether this rally is sustainable.

“There’s still a lot of uncertainty about policy and what’s going to happen,” said Stephen Innes, a senior trader at Oanda Asia Pacific. “I don’t know if this is enough to turn around the momentum on dollar/yen...Brexit is not out of the woods.”

In China, coal and steel shares led gains, spurred by the belief that Beijing’s efforts to reduce excess production in heavy industries are beginning to work. A few companies, including China Coal Energy, revealed improving revenue projections for the first half of this year. Shares of coal miner Inner Mongolia Pingzhuang Energy Resources jumped 10 per cent, the maximum price gain allowed in a day in China.

“The rally this week is largely driven by supply-side-reform expectations, but overall the Shanghai market should trade around [the] 3000 level in the short term,” said Xiao Shijun, an analyst at Guodu Securities in Beijing. It finished Tuesday at 3049.38.

In other markets, China’s central bank guided the yuan to its weakest level in more than 5 1/2 years. The yuan’s reference point was set at 6.6950 against the US dollar, the highest level for the dollar since October 2010. Analysts expect the People’s Bank of China to ease policy again soon.

- Dow Jones newswires