Asia stocks extend gains after ECB's fresh easing measures

Asia Markets
Asia markets open positively in early trade   

Asia markets traded higher across the board on Monday, extending gains from last week following the announcement of fresh stimulus measures from the European Central Bank (ECB).

The Japanese Nikkei 225 closed up 294.88 points, or 1.74 percent, at 17,233.75, while the South Korean Kospi finished up 0.04 percent, or 0.86 point, at 1972.27. Hong Kong's Hang Seng index gained 235.74 points, or 1.17 percent, to 20,435.34.

Australia's S&P/ASX 200 closed up 19.06 points, or 0.37 percent, at 5,185.45, buoyed by gains in the financials sub-index, up 0.55 percent, and the energy sub-index, which tacked on 1.35 percent.

Chinese markets finished higher, with the Shanghai composite closing up 49.57 points, or 1.76 percent, at 2,859.88, while the Shenzhen composite added 60.04 points, or 3.56 percent, to 1,745.28.

Some market commentators believe the ECB's announcement Thursday of additional easing bolstered demand for riskier assets.

But there were doubts about the rally. Traders have been hesitant to increase risk in portfolios in any great size today, said Chris Weston, chief market strategist at spreadbetter IG, in a note Monday.

"The feeling on the floors is that the move higher in risk assets still has legs, but there is a healthy degree of skepticism and there are a number of longs waiting to reverse to short or increase cash allocations should prices show even the slightest hint of rolling over," said Weston.

A man stands at a trading terminal of a securities brokerage in Beijing, China.
Qilai Shen | Bloomberg | Getty Images
A man stands at a trading terminal of a securities brokerage in Beijing, China.

On Thursday, the ECB cut its main refinancing rate to 0.0 percent and its deposit rate to negative 0.4 percent. The central bank extended its monthly asset purchases to 80 billion euros ($87 billion), to take effect in April, up from 60 billion euros previously. The bank will also launch a new series of four targeted longer-term refinancing operations (TLTROs) with maturities of four years, starting in June.

Mark Matthews, head of research for Asia at Julius Baer, said in a morning note that markets realized the ECB's TLTROs were "free money" for banks.

"Assets will inflate in places the money wasn't intended to go, but also where it was intended," said Matthews.

Central banks remain in focus this week, as the Bank of Japan (BOJ) starts its two-day monetary policy meeting on Monday and the U.S. Federal Reserve meets later this week.

Vishnu Varathan, a senior economist at Mizuho Bank, said in a note Monday that while no rate hike is expected from the Fed, "all eyes will be on the 'dot plots' for guidance on the Fed's future policy outlook."

The so-called dot plot is released as part of the Federal Open Market Committee's Summary of Economic Projections, alongside its policy decision statement, and shows where individual committee members think interest rates should be in the current year and in future years.

Similarly, Varathan said he did not expect any policy actions out of the BOJ's meeting, adding "BOJ will probably pause for a while to evaluate its impact on inflation and on the banking sector."

In the currency market, the "risk on" mode in trading saw the Australian dollar touch its highest level since July 2015 against the U.S. dollar, with the pair at 0.7535, despite disappointing Chinese data released over the weekend. The Australian dollar is usually considered a proxy for China's economy.

Reuters reported government data showed factory output grew 5.4 percent in January and February combined from a year earlier, slowing from a 5.9 percent rise in December. Retail sales, which is a measure of domestic consumption, rose 10.2 percent in the first two months, falling short of market expectations of a 10.8 percent rise.

Elsewhere, the Japanese yen remained at the 113 handle against the greenback. The dollar/yen pair traded at 113.79 as of 4:00 p.m. HK/SIN time. Japanese exporters closed mostly higher, with shares of Toyota adding 0.98 percent, Nissan gaining 1.5 percent and Honda higher by 0.48 percent.

The Chinese yuan was flat against the dollar at 6.4938. Before market open, the People's Bank of China (PBOC) fixed the yuan mid-point at 6.4913. On Friday, the PBOC set the yuan mid-point fix at 6.4905, its strongest level in 2016.

Symbol
Name
Price
 
Change
%Change
NIKKEI
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HSI
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ASX 200
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SHANGHAI
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KOSPI
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CNBC 100
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Oil prices retreated late in Asian trading hours, with U.S. crude futures down 0.94 percent at $38.14 a barrel, and global benchmark Brent declining 0.54 percent to $40.19.

Energy plays were higher across the board, with Santos up 3.37 percent, Oil Search adding 0.14 percent and Inpex gaining 1.09 percent. Chinese mainland oil plays closed up, with Sinopec adding 3.29 percent and China Oilfield gaining 1.98 percent.

In corporate news, shares of Telstra closed up 2.33 percent after the company announced that it was ending its joint venture negotiations with Philippine conglomerate San Miguel.

In a media release on its website, Telstra said it had been unable to reach commercial arrangements on a possible equity investment in a wireless joint venture in the Philippines with San Miguel.

One of China's biggest property firms, China Vanke, signed a deal worth up to $9.3 billion with subway operator Shenzhen Metro Group that could make the latter its biggest investor, reported Reuters.

Vanke's management has been battling for control of the company with its biggest current shareholder Baoneng, a financial conglomerate, said Reuters.

Hong Kong-listed shares of China Vanke finished up 10 percent.

On Friday, U.S. indexes closed sharply higher, with the Dow Jones industrial average up 1.28 percent, the S&P 500 higher by 1.64 percent and the Nasdaq composite gaining 1.85 percent.

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