A report by the Sankei newspaper indicated the Bank of Japan is considering increasing the size of its emergency credit program to US$351 billion or 30 trillion yen and lengthening loans to 6-month terms from the current 3-month terms in order to lower longer term rates. This report sent Asian markets trading higher all throughout the day as investors speculate on an easier monetary stance. (See RGE Critical Issue: Will They Won’t They? Is it Time Japan Intervened to Weaken the Yen?Yen Trends: How Has the Yen Been Behaving?). Further supporting the markets’ rally was Applied Materials stronger than expected profit forecast. The semiconductors builder said its profit for the current period will exceed analysts’ estimate of 26 cents a share by 2 to 6 cents.
The MSCI Asia Pacific Index gained 0.6% to 119 while the MSCI ASIA APEX 50 advanced 0.9% to 753.
In Japan, stocks rose on speculation the central bank will further ease monetary policy. The Nikkei 225 advanced 1.3% to 9,363. Tokyo Electron surged 5.3 % after AMAT raised its profit forecast. Mitsubishi Estate rose 3.1% after the housing loan agency said it will extend its low mortgage rate program. Nationwide department store sales declined 1.4% y/y in July while machine tools orders rose another 144.9% y/y.
In Hong Kong, stocks rose on upbeat corporate earnings. The Hang Seng Composite advanced 0.2% to 21,072. China Merchant bank rose 2.2% after reporting profit that beat analysts’ estimates. China mobile dropped 3% despite beating analysts’ profit estimate as competition intensified.
In mainland China, stocks also rose led by coal and gold producers. The Shanghai SE Composite gained 0.8% to 2,688. Shandong Gold rose 2.5%.
In India, stocks rose as slower inflation fueled speculation that the monsoon will boost crop output. The BSE SENSEX 30 advanced 1.1% to 18,455. ICICI bank rose 4.7% while HDFC bank gained 1.7%. Wholesale foods prices rose 10.35% y/y in August, less than the prior period.
In Australia, the S&P/ASX 200 index advanced 0.1% to 4,479, while in Korea the KRX 100 jumped 1.3% to 3,740.
Ten-year JGBs fell with the yield up 1.7 bps to 0.94%. Sovereign CDS spreads narrowed across the region except in Australia.Corporate spreads narrowed with the Markit iTraxx Asia ex-Japan 50 IG down 12.3 bps to 119 bps and the iTraxx Japan index down 3.7 bps to 110 bps.
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