Sun, Aug 30, 2020 page14

• Most Asia stocks up on Fed news, Tokyo plunges

  • AFP and Bloomberg, HONG KONG
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  Expectations that US interest rates would stay ultra low for as long as needed on Friday helped lift most Asian equities, but Tokyo tumbled after Japanese Prime Minister Shinzo Abe said he would resign to undergo treatment for a chronic illness, raising questions over the future of his signature stimulus policy.

  Volatility surged in Japan, with the benchmark TOPIX finishing the session down 0.68 percent after sliding as much as 1.6 percent.

  However, it still managed to gain 0.05 for the week.

  

  A pedestrian walks past a stock board outside a securities firm in Tokyo, Japan, on Friday.

  Photo: Bloomberg

  Tokyo’s Nikkei 225 initially dropped more than 2 percent, but ended down 1.41 percent at 22,882.65. It lost 0.16 percent from a week earlier.

  The news also sent the yen, a safe haven in times of uncertainty, surging briefly to 105.61 against the dollar, from 106.74.

  “Abenomics may have had split views, but the fact that they put forward a clear policy of getting out of deflation was a positive for the equity markets,” said Hiroshi Matsumoto, head of Japan investment at Pictet Asset Management. “It’s not the end of the world for the Japanese economy, but we cannot clearly see who the successor will be, and there’s a question of how much Abenomics policies will be carried forward.”

  Abe came to power for the second time in 2012, touting new plans to revive the economy through unprecedented monetary easing and regulatory reform that was eventually labeled “Abenomics.” Few market participants had expected he would step down after his right-hand man, Japanese Chief Cabinet Secretary Yoshihide Suga, said that Abe should be able to serve out the remainder of his term as a party leader.

  The prime minister confirmed reports in a press conference that he was dealing with ulcerative colitis, a chronic digestive condition that also forced him to step down as premier in 2007.

  The TAIEX was also down on Friday, losing 68.46 points, or 0.53 percent, to close at 12,728.85 on turnover of NT$204.557 billion. It gained 0.96 percent for the week.

  US Federal Reserve Chairman Jerome Powell on Thursday said that the Fed would be in no rush to reel in inflation, even if it overshoots the central bank’s two percent target, instead opting for an average that took into account periods of weak price rises.

  Powell said that policymakers would stick with the new framework “for some time,” indicating that an era of cheap borrowing is here for the foreseeable future.

  “In the absence of fresh positive economic news recently, this statement should cheer investor sentiment,” said Tai Hui (許長泰), chief Asia market strategist at JPMorgan Asset Management. “Monetary policy is likely to stay accommodative for even longer. Not only will the Fed need to provide sufficient support to help the economy through the [COVID-19] pandemic fallout, but also policy rates should be kept low beyond that to generate sufficient inflationary pressure.”

  “The search for income for Asian investors will continue — this should be supportive of risk assets such as equities, corporate bonds and emerging-market fixed-income,” Tai added.

  In China, the Shanghai Composite Index gained 1.6 percent to close at 3,403.81. It was up 0.68 percent for the week.

  Hong Kong’s Hang Seng Index closed 0.56 percent higher at 25,422.06, and gained 1.23 percent for the week.

  In South Korea, the KOSPI rose 0.4 percent to 2,353.80, increasing 2.14 percent from a week earlier.

  Additional reporting by staff writer, with CNA
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