Central banking action supports Asian stocks

Most markets end up on easy liquidity conditions



Asian markets edged up today as a couple of surprising decisions from the regions tops central bankers fuelled risk appetite and the drop in the value of US dollar augured well for commodities. Banks, resources and exporters gained across the region even after a moderately negative start to the session on downbeat overnight US market cues. In Australia, the central bank to keep the cash rate target unchanged at 4.5% against calls of a hike by 25 basis points while the Bank of Japan also surprised the markets by cutting its overnight call rate to a range of 0.0%-0.1% as it attempted to curb the freakish rise in value of the Japanese yen. Commodities soared with gold hitting a fresh lifetime high while base metals and crude oil were generally stronger. Chinese equities remained shut on a weeklong public holiday.

Japanese equities witnessed a whirlwind ride today after the yesterday's drop. The stocks extended their losses early into the day as losses on Wall Street made traders stay away from active trading ahead of a Bank of Japan decision on interest rates and pulling the benchmark Nikkei 225 Average to a three week low. However, the trading momentum altered swiftly once the BOJ decision was out. The BOJ cut its overnight call rate to a range of 0.0%-0.1% and said it will keep its essentially zero interest rate policy until the board judges that price developments have stabilized. The central bank also decided to establish a temporary fund in the BOJ's balance to buy such financial assets as long-term government bonds, commercial paper, asset-backed commercial paper, and corporate bonds.

Japanese stocks turned higher in intraday moves following this, recording thick and fast gains as banks and exporters cruised upwards. The Nikkei 225 index gained by 137.70 points, or 1.47%, to close out the day at 9518.76 while the broader-based TOPIX added 10.74 points or 2.1% to end at 833.48.

In Australia, a similar story was repeated though stocks failed to get going into green. Market recovered from early lows as the Reserve Bank of Australia's unexpected decision to hold official rates steady spurred a buying spree in index-linked counters. RBA governor Glenn Stevens said in a statement accompanying the central bank decision that interest rate levels were appropriate for the time being. ‘‘If economic conditions evolve as the board currently expects, it is likely that higher interest rates will be required, at some point, to ensure that inflation remains consistent with the medium-term target,'' Mr Stevens said. The benchmark S&P/ASX200 index eased 18.4 points, or 0.4% to 4606.9, while the broader All Ordinaries index dropped 17.8 points, or 0.4%, to 4660.6.

In Mumbai, the key benchmark indices hit fresh intraday lows in late trade on profit taking, snapping last three days' gains. The market breadth was positive. Index heavyweight Reliance Industries edged higher. Auto stocks rose. But, FMCG and banking stocks fell. As per provisional figures, the BSE 30-share Sensex was down 89.80 points or 0.44% to 20385.93. The index fell 92.57 points at the day's low of 20,383.16 in late trade. The Sensex rose 84.81 points at the day's high of 20,560.54 in mid-morning trade. The S&P CNX Nifty was down 19.75 points or 0.32% to 6,139.70 as per provisional figures

In other markets, the Straits Times index in Singapore added 0.16%, Hang Seng index in Hong Kong nudged up 0.09% while the TSEC index in Taiwan edged up shed 0.55%. DOW futures surged after an initial drop and are up 17 points from the previous close. Light sweet crude oil futures for November delivery rebounded after a moderate sell off initially and currently quoting above $82 per barrel- closing on its two-month highs.