Asian stocks still basking in optimistic China glow, yen down

NDTV Profit Desk

11 Sep 2013, 07:20 AM IST

Asian stocks rose on Wednesday, on track to post their 10th straight day of gains, while investors gave the safe-haven yen a wide berth as optimism for the Chinese economy grew and worries about U.S. military strikes on Syria receded.

Tokyo's Nikkei put on 0.5 per cent, reaching highs not seen since late July. MSCI's broadest index of Asia-Pacific shares outside Japan advanced 0.2 per cent, amassing gains of nearly 3 per cent so far this week. It has surged more than 8 per cent in two short weeks.

The rally partly reflected a rebound in emerging markets as a recent string of upbeat Chinese data bolstered investor confidence -- even as the Federal Reserve looked set to begin scaling back its bond-buying programme next week.

Indeed, MSCI's emerging equities index has jumped more than 9 per cent in two weeks, cutting its annual loss to around 6 per cent from as deep as 17 per cent.

"Investors may become more confident about the ability of emerging markets (EM) to weather future Fed tightening if EM cyclical data were to gain traction," said Koon Chow, head of EM strategy at Barclays Capital in London.

But some analysts suspect investors may be ready to book some profit, meaning further gains from here may be curbed.

"The rapid rise in recent weeks suggest there might be profit-taking which will limit gains," said Daishin Securities analyst Park Jung-seop.

Investors had been bailing out of emerging markets as they positioned for less support from the Fed, although last Friday's disappointing U.S. jobs data convinced many economists that any withdrawal will probably be very gradual.

Diminishing worries about potential U.S. military strikes on Syria had further sharpened investor appetite for emerging markets assets. Syria has accepted a Russian proposal to give up chemical weapons and win a reprieve from U.S. action.

This improved sentiment can also clearly be seen in the Australian dollar, which is usually used as a liquid proxy for Asia's emerging markets. It has rallied 4.7 per cent to $0.9307 from the August 28 trough of $0.8891.

Currency investors, though, gave the yen a wide berth as the Bank of Japan is expected to continue its massive stimulus programme amid signs it is starting to lift the world's third biggest economy out of stagnation.

The dollar stood at 100.23 yen after climbing 0.8 per cent on Tuesday to a seven-week peak of 100.47. The euro bought 132.98 yen, having gained nearly 1 per cent to a 16-week high of 133.31 overnight.

Against the dollar, the common currency stood at $1.3266, struggling to make further headway after a 1-per cent rally over Friday and Monday.

Oil stayed under pressure with Brent crude languishing near a 2-1/2-week trough of $110.59. It last traded at $111.30, having shed 4 per cent in the past two sessions, its largest two-day drop since June.

There is little in the way of major economic news out of Asia on Wednesday. China's Premier Li Keqiang will give a keynote speech at the World Economic Forum in Beijing later in the day.