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Asia markets trade higher, tracking US gains as Federal Reserve remained on hold

Asia markets climbed across the board on Thursday, as uncertainties surrounding key monetary policy decisions came to a close, following Wednesday's announcements from the U.S. Federal Reserve and the Bank of Japan (BOJ).

Australia's ASX 200 closed up 34.94 points, or 0.65 percent, at 5,374.50, with most sectors finishing higher. The energy sector advanced 2.10 percent, materials was up 2.63 percent and the heavily-weighted financial sector was flat.

New Zealand's NZX 50 was up 30.54 points, or 0.42 percent, at 7,311.71, while in South Korea, the Kospi was higher by 13.71 points, or 0.67 percent, at 2,049.70.

In Hong Kong, the Hang Seng index briefly touched a session high of 24,058.65 before paring some of the gains to trade up 0.56 percent at 23,801.67 as of 3:10 p.m. HK/SIN.

Mainland markets in China also gained, with the Shanghai composite closing up 16.81 points, or 0.56 percent, at 3,042.68, while the Shenzhen composite added 12.56 points, or 0.62 percent, to 2,018.16.

The Japanese market, which climbed nearly 2 percent on Wednesday following the Bank of Japan's (BOJ) decision to overhaul its monetary policy framework, was closed Thursday for a public holiday.

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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Singapore-based DBS Bank's analysts said in a note to clients on Thursday that stock markets reacted "well to the Fed hold and the BOJ tweak." They noted the perception gap between the Fed and the market has "narrowed somewhat."

"As the dissents on policy rose to three (highest this year), the market has notched up the probability of a December hike to 63 percent, up from 58 percent before the meeting," the DBS analysts said.

Other analysts suggested now that the key decisions from the U.S. and Japan were over, more investors would likely get back into the stock market.

"The combination of these central bank decisions [from the BOJ and the Fed] is likely to see equity markets remove some risk premium over coming days," said Ric Spooner, chief market analyst at CMC Markets.

The Fed kept interest rates unchanged on Wednesday, despite hints of a hike later in the year. In its post-meeting statement, the Federal Open Market Committee expressed confidence in economic growth, but not enough to make a move this month. They also lowered their expectations for rate hikes in the years ahead, suggesting two hikes in 2017 and three each in 2018 and 2019.

"Based on the experience of the last few years, it's understandable that the market is skeptical of Fed rate hike expectations as they have been continuously revised down," Shane Oliver, head of investment strategy and chief economist at AMP Capital, said.

Oliver added that he expected a rate hike from the Fed in December, but the caveat being more "consistently positive economic data from the U.S. over the next three months."

Tomohiro Ohsumi | Bloomberg | Getty Images

In the currency market, the dollar fell against a basket of currencies, with the dollar index trading at 95.410 as of 2:09 p.m. HK/SIN, lower than the 96.151 level it touched on Wednesday afternoon Asia time.

The pullback in the dollar was likely behind a rise in the yen. The dollar/yen pair reached levels as high as near 102.78 after the BOJ's decision on Wednesday; the currency pair traded at 100.23 on Thursday afternoon Asia time.

Kathy Lien, BK Asset Management's managing director of foreign exchange strategy, said in an early morning note the movement in the dollar/yen pair was a reflection that somehow "both central banks managed to fall short of expectations."

On Wednesday, the Japanese central bank kept rates steady but issued a plethora of fresh changes to its policy approach, marking its latest attempt to boost prices and goose economic growth.

In other currency moves, the Australian dollar traded up 0.34 percent at $0.7649, likely boosted by the Fed's decision to keep interest rates on hold, which in turn pushed the greenback lower. A jump in oil prices during the U.S. session on Wednesday and further advances during Asian hours Thursday could also have played a role in pushing the Aussie higher.

AMP Capital's Oliver warned that prolonged strength in the Aussie, as a result of continuous delays in Fed rate hikes, could "dampen the ongoing rebalancing in the Australian economy."

Oil prices climbed on Wednesday after another weekly drop in U.S. crude inventory. Data from the U.S. Energy Information Administration (EIA) showed crude inventories fell by 6.2 million barrels in the previous week, compared with a Reuters poll that predicted a 3.4 million build.

On Thursday afternoon, during Asian hours, oil prices continued their advance. U.S. crude was up 0.93 percent at $45.76 a barrel as of 2:34 p.m. HK/SIN, after climbing 2.9 percent in the U.S. session. Global benchmark Brent was up 0.88 percent at $47.24 a barrel, following an overnight gain of 2 percent.

The Reserve Bank of Australia's (RBA) new governor Philip Lowe made his first public appearance Thursday in front of a house committee, where he said the RBA were not "inflation nutters," and emphasized it was not in the public interest to rush inflation higher at the cost of deteriorating private sector balance sheets.

He reiterated the central bank's gradual inflation target between 2 and 3 percent, thus leaving room for further easing and gave an upbeat assessment of the Australian economy's readjustment following the unwinding of the mining investment boom.

"[Governor Lowe] appears comfortable with domestic economic conditions and global risks, increasingly confident on the outlook, not especially uncomfortable with the Aussie, and more sensitive to the risks to financial stability," said analysts at Goldman Sachs.

"We interpret this as consistent with our out-of-consensus view for the RBA to remain on hold through 2016 and 2017," the Goldman analysts said.

The Reserve Bank of New Zealand kept its official cash rate unchanged at 2.0 percent on Thursday, but left the door open for further easing in the future, citing a relatively stronger Kiwi dollar and inflation hovering below the central bank's target.

ANZ economists Cameron Bagrie and Philip Borkin said the RBNZ's confirmation that further policy easing would be required will "soothe a market that had become skeptical of the RBNZ's desire to continue easing, and is the strongest hat-tip to a November cut the market could ask for."

The New Zealand dollar retreated to as low as $0.7319 in the wake of the decision, from levels as high as $0.7367 before the announcement. At 2:11 p.m. HK/SIN, the kiwi was fetching $0.7335.

In company news, shares of troubled container shipping company Hanjin Shipping climbed 29.61 percent following a Reuters report that said Hanjin's lead creditor, Korea Development Bank, was considering lending the company about 50 billion won ($45 million) to help unload stranded cargo. The news was confirmed by the bank after market close, according to Reuters.

Reuters said an estimated $14 billion of cargo was trapped on Hanjin ships, following the company's collapse late last month.

Elsewhere, Chinese Premier Li Keqiang told the United Nations on Wednesday that the world's second-largest economy would promote economic development by opening up its economy more widely and pledged China would not engineer a devaluation of its currency to boost exports, according to a Reuters report.

On Wednesday, the Dow Jones industrial average gained 163.74 points, or 0.90 percent, to close at 18,293.7. The S&P 500 rose 23.36 points, or 1.09 percent, to end at 2,163.12, while the Nasdaq advanced 53.83 points, or 1.03 percent, to close at 5,295.18.

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