Asian stocks rally as bargains eyed

Investors have stepped back into the region’s beaten-up sectors, pushing stockmarkets higher.

Shares across Asia rallied on Wednesday as worries about the UK’s decision to leave the European Union abated and investors began buying up badly beaten sectors, including financials.

Banks in Australia rose for a second day, with Australia & New Zealand Banking leading the major names. ANZ rose 1.3 per cent.

Banks on Japan’s Topix index jumped 1.8 per cent although they remain down 4.8 per cent for the week. Also rising in Japan were the insurance, steel and export sectors — Tokio Marine Holdings was up 6.4 per cent, Nippon Steel & Sumitomo Metal Corp added 6.4 per cent and Sony Corp advanced 4.8 per cent.

More broadly, the Nikkei Stock Average rose 1.6 per cent while Hong Kong’s Hang Seng Index was up 1.3 per cent and South Korea’s Kospi was up 1 per cent. The Shanghai Composite Index finished up 0.7 per cent.

The gains in Asia come after global stocks held steady overnight and the British pound rose against the US dollar.

Investors expect volatility in financial markets to remain, as the UK attempts to sort out its relationship with the EU following last Thursday’s vote in favour of exiting the bloc.

“A key risk will be whether the reserve currency status of the pound would be taken away given potential instability in the UK economy,” said Bernard Aw, market strategist with brokerage IG. “Major rating agencies have already downgraded the UK’s credit ratings on account of lesser predictability and efficiency in policy making. If this happens, we would see renewed pressure in the [pound].”

Standard & Poor’s cut the UK two notches to AA from AAA Monday, and Fitch followed with a one-notch move to AA.

The gains Wednesday lift Japan shares to roughly flat for the week.

A government policy meeting by top Japanese financial authorities earlier Wednesday “yielded nothing,” said Tomoichiro Kubota, a senior market analyst at Matsui Securities. The benchmark had dropped nearly 8 per cent last Friday.

Investors were also still pushing up safe-haven assets slightly. Gold prices rose 0.5 per cent to $US1,324.80 a troy ounce and the Japanese yen strengthened 0.3 per cent to Yen102.32 to one US dollar, both during the Asian trading day.

Yields on Japanese government bonds remained near record lows. Returns on the Japanese 20-year bond reached a fresh all time-low of 0.039 per cent according to Reuters. Yields fall when prices rise.

— Wall Street Journal