Asia markets close up after Wall Street rallies on Fed hike

Yoshikazu Tsuno | AFP | Getty Images

Asian stock markets closed in positive territory, taking cues from a positive finish in Wall Street overnight after the Federal Reserve raised its target federal funds rate to a range of 0.25 to 0.5 percent.

"Asset markets saw the Fed as giving a good enough combination of confidence in activity and promise of future restraint that investors were relieved and pleased," Steven Englander, Citi's global head of G10 foreign-exchange strategy, said in a note. "(The Fed's) comments that they were hiking because they thought the economy was strong enough were far more powerful than saying that their hiking was so tentative that they would wait a good long time before doing it again."

This was the first time the Federal Reserve raised its interest rates since June 29, 2006. Wall Street had widely expected the move and investors will be watching closely for clues about the timeline of future rate hikes.

The gains in Asia's equity markets came despite analyst concerns that higher U.S. rates might weigh on the region's shares.

Simon Male, head of Asian equities at Auerbach Grayson, told CNBC that the Fed's move was well-telegraphed to markets and Asia markets had already fallen throughout the year in anticipation.

"You saw a lot of money moving out of emerging markets in anticipation of better returns in the U.S. and that's the reason why Asia was down so heavily in the last year," Male said. But he noted that while Asia's growth picture is "not that great," he added, "valuations have come back to very reasonable levels. You're looking at Asian markets trading about 11 times forward earnings and with a very nice 3 percent yield as well."

Chinese markets trade up

The Chinese market closed in the green with the main Shanghai Composite index up 64 points, or 1.83 percent, at 3,580. The smaller Shenzhen Composite finished up 62 points, or 2.7 percent, at 2,342. Hong Kong's Hang Seng index closed up 170 points, or 0.79 percent, at 21,872.

Before the start of trading, the People's Bank of China (PBOC) set the midpoint for the yuan at 6.4757 per dollar, lower than the previous day's fix of 6.4626. The yuan is allowed to trade within a range of 2 percent above or below the official fixing rate.

The yuan traded lower at 6.4818 against the dollar.

Mainland-listed brokerages and banks were trading in the green. Shares of Citic Securities, Haitong Securities, and Guosen Securities saw gains between 1.27 and 2.26 percent. Banking shares were also higher, with Bank of China's mainland-listed shares up 0.7 percent and China Construction Bank's adding 0.9 percent.

Property stocks on the mainland were also up. Shares of Vanke closed up 10 percent, while Poly Real Estate shares were up 10.03 percent. Hong Kong-listed Evergrande, one of China's largest property developers, tacked on 4.58 percent.

Elsewhere, the Hong Kong Monetary Authority (HKMA) raised its base rate by 25 basis points to 0.75 percent.

The chief executive of HKMA, Norman Chan, warned of possible shocks of interest rate normalization, including capital outflows and economic pressure. He said, "The actual speed of outflows from Hong Kong dollar will depend on the pace of U.S. interest rate hikes and the interest rate differential between the U.S. dollar and Hong Kong dollar."

The Hong Kong dollar, which is pegged to the U.S. dollar, traded flat at 7.7502.

Amid concerns that higher interest rates may damp interest in Hong Kong real estate, property stocks focused on the protectorate were mixed. Hysan Development shed 1.39 percent, while Henderson Land tacked on 0.53 percent.

Banking stocks Standard Chartered and HSBC closed up 8.6 and 2.83 percent respectively. Higher interest rates may benefit banks' net interest margins.

Japan, South Korea rally

The Japanese and South Korean markets reacted positively throughout the trading day.

The Nikkei 225 closed up 303 points, or 1.59 percent, at 19,353, with most sectors closing in the green. Banks, securities and insurance sectors closed up between 1.04 and 2.42 percent.

Finance stocks Mitsubishi UFJ Financial Group, SMFG, and Mizuho Financial Group finished up between 0.77 and 0.98 percent.

Export stocks Toyota, Nissan, Honda, and Sony were up between 0.43 and 2.36 percent, while index heavyweights Fanuc and Fast Retailing closed up 2.19 and 1.48 percent.

Earlier, Japan's finance ministry released the country's November trade data. Japanese exports fell 3.3 percent on-year in November, worse than the 1.5 percent decline forecast in a Reuters poll. Imports for the month fell 10.2 percent on-year.

The Japanese yen traded modestly lower at 122.35 against the dollar.

In South Korea, the Kospi finished up 8.56 points, or 0.43 percent, at 1,978.

Blue chip stocks traded mixed. Shares of Samsung Electronics erased early morning gains and closed down 0.69 percent. Posco was down 0.9 percent, while Hyundai Motor rose by 1.63 percent.

ASX closess higher, banks finish strongly

The Australian market finished higher, with the main ASX 200 index adding 74 points, or 1.46 percent, to 5,102. Most sectors on the ASX closed in the green.

Banking stocks climbed, with shares of ANZ, Commonwealth Bank of Australia, Westpac and NAB - Australia's four biggest banks - tacking on between 1.97 and 2.29 percent.

Resources shares had a more mixed fortune. Shares of Rio Tinto, one of Australia's biggest miners, closed up 0.79 percent, while BHP Billiton was down 0.93 percent.

Iron ore producers traded lower, losing their early gains, with shares of Fortescue down 3.42 percent. Atlas Iron trimmed losses and was unchanged at market close, while BC Iron shed 4.35 percent.

Goldman Sachs said in a note that it was reducing its forecast for iron ore prices due to a maturing steel market in China. It added it expects "the pace of mine closures to accelerate in 2016 as producers with negative cash flow struggle to find alternative sources of funding." it cut its 2016 forecast by 13 percent to $38 a tonne.

The Australian dollar traded lower at 0.7162 against the dollar.

No respite for oil

Oil prices continued to take a drubbing, with U.S. crude oil futures erasing morning gains, down by 11 cents, or 0.31 percent, at $35.41 a barrel in afternoon trade.It fell nearly 5 percent in the overnight session. Brent contracts were down 20 cents, or 0.53 percent, at $37.19 a barrel, after falling nearly 3 percent in U.S. trade.

Energy plays across the region traded mixed.

In Australia, shares of Santos closed up 0.87 percent, Oil Search fell 1.77 percent and Woodside Petroleum shed 0.85 percent.

Japan's Inpex and Japan Petroleum traded mixed, up 0.39 percent and down 0.91 percent respectively.

South Korea's SK Innovation was up 1.5 percent, S-Oil added 1.44 percent and GS Holdings gained 0.98 percent.

Chinese energy plays CNOOC and Petrochina were down 2.2 and 1.89 percent respectively, while Sinopec closed up 0.21 percent.

Overnight in the U.S.

ASX 200
CNBC 100

Major indexes in the U.S. closed higher following the Fed decision. The Dow Jones Industrial Average was up 224 points, or 1.28 percent, at 17,749. The S&P 500 was up 29.66 points, or 1.45 percent, at 2,073, while the Nasdaq was up 75.78 points, or 1.52 percent, at 5,071.

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