Asian stock markets rose sharply on Friday, joining a rally in U.S. stocks overnight, after the U.S. Federal Reserve announced a $40 billion a month "open-ended" program of mortgage backed security purchases while also committing itself to keep interest rates exceptionally low until at least 2015 to aid U.S. recovery.
The Fed said it would continue easing until the labor market outlook improves "substantially." Investors cheered Fed's commitment to action as weaker growth and low interest rates abroad may result in big inflow of funds to emerging markets.
The Fed, which was under pressure to act amid the sagging economies of Europe and the United States, has succeeded in conveying a consisting message that investors can count on low interest rates and accommodative monetary policy for a considerable time.
The Fed's latest action came a week after the European Central Bank announced bond-buying measures to check volatility in sovereign bonds of troubled European countries. It is now widely expected that the Bank of Japan would eventually follow the Federal Reserve on easing monetary policy, when the policy board meets next week.
Tokyo stocks rose sharply as the Fed's stronger-than-expected move on mortgage-backed securities heightened expectations that the Bank of Japan would ease its policy further to support the export-reliant economy at its policy meeting next week. Hinting at possible yen intervention, Japan's finance minister today urged the Bank of Japan to act at the right time.
The Nikkei average jumped 1.8 percent to end at its highest level since March 23, while the broader Topix index added 1.7 percent. Shares sensitive to growth and inflation benefited the most.
Steelmakers JFE Holdings and Nippon Steel jumped about 5 percent each, while Sumitomo Metal Mining soared 9.4 percent, benefiting from a positive Credit Suisse appraisal. Oil firm Inpex climbed 5.9 percent, shipping line Mitsui OSK jumped 5.7 percent, realty firm Mitsui Fudosan rallied 5.5 percent and trading house Mitsubishi Corp. advanced 4 percent. Financials also ended sharply higher, with Nomura, Dai-ichi Life Insurance and Sumitomo Mitsui Financial Group adding 4-5 percent.
Chinese shares underperformed regional markets, with the benchmark Shanghai Composite index rising 0.6 percent, as the Fed's promise to buy mortgage-backed securities at a pace of $40 billion a month raised concerns that inflationary pressure may increase domestically. Hong Kong's Hang Seng index soared 2.9 percent, with resource-related stocks leading the rally.
Australian shares followed U.S. shares higher, with the Fed's much-awaited QE3 announcement underpinning sentiment. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index rose about 1.2 percent each, with miners rallying taking cues from strength in the metals pack.
BHP Billiton gained 1.6 percent and Rio Tinto rallied 2.8 percent, while gold miner Newcrest soared 7.30 percent amid the surge in gold prices Thursday. Fortescue Metals shares were placed in a trading halt until Tuesday pending an announcement from the company on its debt restructuring.
Banks also rose across the board, with ANZ, Commonwealth and NAB adding about half a percent each, while Westpac rose 1.3 percent. Construction company Leighton Holdings climbed 4.7 percent after its wholly-owned subsidiary Thiess Pty won a $154 million contract to build transport facilities in Sydney's CBD.
Seoul shares jumped about 3 percent to a five-month high, as investors cheered the Federal Reserve's move to launch a new round of bond buying and Standard & Poor's upgrade of South Korea's credit rating. The benchmark Kospi average rose 2.9 percent to breach the 2,000-point mark, with steel firms and brokerage stocks outperforming.
Apple's component suppliers LG Display and SK Hynix jumped about 5 percent each, rebounding from the previous session's retreat after many analysts predicted that Apple will sell more than 10 million units of the newly-unveiled iPhone 5 by the end of this month.
Standard & Poor's today joined its fellow ratings agencies in upgrading the sovereign ratings on South Korea, citing waning geopolitical threats on the Korean peninsula amid stable political conditions in North Korea. The ratings agency lifted Korea's credit rating to "A plus" from "A", the fifth-highest level on its rating grade, and affirmed its foreign-currency short-term ratings at "A-1", reflecting the firm's expectations that the Democratic People's Republic of Korea will remain politically stable in the next three to five years.
New Zealand shares pared early gains to end modestly higher. The benchmark NZX-50 rose 0.2 percent to a fresh four-year high, with gold miner OceanaGold climbing 8 percent after gold prices surged up 2 percent overnight in the aftermath of the FOMC announcement. NZX, the stock exchange regulator, rallied 2.8 percent, Fletcher Building, the nation's largest construction company, gained 1.6 percent and carpet maker Cavalier rose about a percent.
Trade Me shares added 1.8 percent after the NZX said the online auction site will replace Nuplex Industries in the NZX20 index comprised of most liquid companies. Exporter Fisher & Paykel Healthcare led the decliners on the exchange, tumbling 6.6 percent as the kiwi dollar climbed to a six-month high.
Elsewhere, India's benchmark Sensex was last rallying 2.5 percent on hopes the government would speed up reforms after the Cabinet Committee on Political Affairs approved a Rs. 5 hike in the price of diesel and limited supply of subsidized LPG cylinders to six per household in a year.
Indonesia's Jakarta Composite index was up 2.1 percent, Malaysia's KLSE Composite index rose 0.9 percent, Singapore's Straits Times index was rising 1.3 percent and the Taiwan Weighted average added 2.1 percent.
U.S. stocks rose sharply overnight, as traders reacted positively to the Federal Reserve's highly-anticipated monetary policy announcement. The Dow and the S&P 500 jumped about 1.6 percent each to reach their best closing levels in well over four years, while the tech-heavy Nasdaq rose 1.3 percent to a nearly 12-year closing high.
by RTT Staff Writer
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