The Nikkei’s 2.3% gain followed Tuesday’s 10% rally, suggesting investors were finding their footing after the recent market rout
Asian share markets extended their rally on Wednesday, led by another bounce in the Nikkei, as the Bank of Japan unexpectedly turned cautious on rate hikes amidst market volatility, which led to a sharp drop in the yen.
The Nikkei’s 2.3% gain followed Tuesday’s 10% rally, suggesting investors were finding their footing after the recent market rout. The index plunged 13% on Monday.
Sentiment had looked a little shaky early in Asia, but BoJ Deputy Governor Shinichi Uchida said in a speech to business leaders the central bank won’t hike interest rates when financial markets are unstable, boosting risk sentiment.
Hamilton Reiner, head of U.S. Derivatives at JPMorgan Asset Management, believes Japanese stocks would recover from Monday’s 13% slump given the corporate reforms being undertaken by firms represented in the Nikkei.
When you have an environment, the environment of macro and micro does not really change much, and you see this price action, it is really about an opportunity than fear.
Analysts at JPMorgan said the sell-off in Japanese stocks may almost be over, while there is also a view emerging that the unwinding of yen carry trades may be nearing completion.
The unravelling of the yen carry trade – where investors borrow yen at low rates to buy higher yielding assets – was a driving force in the market rout, but again appeared to be stabilising.
MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 1.4%. South Korean stocks gained 2.5% while Taiwan soared 3.4%.
China’s blue chip index gained 0.2% while Hong Kong’s Hang Seng index added 1%, after data showed that Chinese imports in July rose 7.2% from a year earlier, beating forecasts, in a positive sign for domestic demand, although growth in exports slowed.
