Asia Markets

Asian stocks touch decade-high after stronger US lead; Kobe Steel tumbles further

Key Points
  • Asian shares hit a decade-high during the session
  • The PBOC set the yuan midpoint at its highest level in 3 weeks
  • Catalonia stopped short of declaring independence
  • Kobe Steel extended losses after admitting to falsifying product data

A broad index of Asian shares touched a decade-high on Wednesday, taking cues from signs of confidence in the U.S. Meanwhile, the euro held onto overnight gains after Catalonia held back on an outright declaration of independence.

During the morning, the MSCI Asia Pacific ex-Japan index touched its highest levels since 2007 as major indexes across the region recorded gains. As of 4:10 p.m. HK/SIN, it was just off those levels, trading 0.33 percent higher for the day.

Japan's Nikkei 225 reversed early losses to close up 0.28 percent, or 57.76 points, at 20,881.27 — a two-decade high, Reuters said. Blue-chip automakers were pressured, but most tech names held above the flat line: Toyota fell 0.97 percent, Mazda Motor sank 1.99 percent and Softbank Group finished the session 0.39 percent higher.

Core machinery orders for August released Tuesday showed a 3.4 percent rise compared to one month ago, according to Reuters. That far surpassed the 1.1 percent increase median forecast in a Reuters survey.

Across the Korean Strait, the Kospi gained 1 percent to close at 2,458.16 as big name tech plays held onto significant gains made in the previous session. Samsung Electronics rose 3.48 percent and SK Hynix closed up 0.45 percent after surging in the previous session on investor expectations over upcoming quarterly results.

Down Under, the S&P/ASX 200 tacked on 0.59 percent to end at 5,772.145, touching one-month highs earlier in the session. The information technology sub-index led gains, climbing 1.85 percent in the session, while bank and energy stocks also rose.

The positive mood also extended to greater China, which notched moderate gains. Hong Kong's closed down 0.36 percent, or 101.26 points, at 28,389.57. On the mainland, the edged up 0.18 percent to finish the session at 3,389.0492 and the Shenzhen Composite reversed early gains to closed down 0.183 percent at 2,026.4692.

The Chinese yuan was in focus after it surged to its highest levels in almost three weeks in the previous session. On Wednesday, the traded at 6.5766 to the dollar at 4:05 p.m. HK/SIN while the offshore yuan was a tad firmer at 6.5737.

Ahead of Wednesday trade, the People's Bank of China had fixed the yuan midpoint at 6.5841 per dollar, its highest in three weeks, according to Reuters.

The dollar extended losses after falling in the previous session. Traders had attributed the fall in the currency earlier in the week to elevated tensions between the U.S. and North Korea.

Softness in the dollar was also likely due to a spat between President Donald Trump and Sen. Bob Corker, market watchers suggested. Investors are cautious that the exchange could potentially derail Republican plans of passing tax reform.

"Our initial optimism on a skeleton framework that seemed to cry out for bipartisan agreement accord, looks to be proving misplaced," Rob Carnell, Asia head of research at IG, said in a note.

The dollar index, which tracks the U.S. currency against a basket of rivals, stood at 93.153 at 4:05 p.m. HK/SIN, hovering around its lowest levels since the beginning of October. Against the yen, the greenback edged down to trade at 112.26.

Ahead, the greenback is expected to focus on minutes from the Federal Open Market Committee due during U.S. hours.

In another area of market focus, Catalonia's leader on Tuesday asserted that Catalonians had won the rights to independence, but held off declaring the region's separation from Spain. Instead, Catalan leader Carles Puigdemont asked for further talks with the government of Spain.

The euro held onto overnight gains as investors digested the developments in Catalonia and strong export data out of Germany for the month of August. The common currency stood at $1.1830 at 4:06 p.m. HK/SIN, a tad above a high of $1.1811 seen overnight.

Stateside, stocks closed higher on Tuesday after retailer Wal-Mart announced a large share buyback plan. The Dow Jones industrial average tacked on 0.31 percent, or 69.61 points, to close at a record 22,830.68.

In individual stocks, shares of Kobe Steel plummeted to close down 17.79 percent, extending losses made in the previous session when its stock closed down 21.9 percent. The company had earlier admitted to falsifying data about the quality of its products.

Near-term earnings at the company are expected to "take a hit," Nomura analysts Yuji Matsumoto and Takashi Nishizu said in an Oct. 10 note. Rivals of Kobe Steel, however, are "unlikely to poach large amounts" of its market share in the near term as they were already operating at full capacity, the analysts said.

Also in Japan, Sanrio stock closed 9.73 percent lower after the company revised down its forecast for full-year results for the year ending March 2018. The company is most known for being the owner of the Hello Kitty brand.

Great Wall Motor stock traded in Hong Kong spiked more than 14 percent in the session following a report in local media that the automaker would be involved in a joint venture with BMW, according to Reuters.

On the energy front, oil was slightly higher after gaining more than 1 percent overnight following comments from OPEC about market rebalancing. Brent crude advanced 0.3 percent to $56.78 a barrel and U.S. West Texas Intermediate crude added 0.41 percent to trade at $51.13.