HONG KONG: Asian markets on Wednesday extended a global equities rebound after recent losses while riskier assets and oil prices also ticked up, but dealers remained cautious before the US interest rate decision.
Following steep losses in the previous two sessions, Shanghai again saw volatile trading—swinging from negative to positive early on before surging almost five percent in the final hour.
Thursday’s rate decision by the Federal Reserve will be closely watched as Fed policymakers weigh a healthy US recovery against a slowdown across most of the world and recent turmoil unleashed by fears of an economic crisis in China.
Latest indicators out of Washington offer no further clues and the Fed’s decision remains complicated, which has in turn kept investors on edge.
“Uncertainty will continue until we get the news from the Fed,” James Lindsay at Nikko Asset Management NZ in Auckland told Bloomberg News.
“The market is finely balanced on whether the Fed will move or not. There’s been uncertainties about China and global growth but the US economy looks strong enough to be able to withstand an increase in rates.”
Experts have warned that a Fed rise in borrowing costs could severely hurt the struggling world economy, and especially damage emerging markets as investors withdraw cash and turn to the United States for better and safer returns.
Tokyo ended 0.81 percent higher, Sydney gained 1.6 percent and Seoul was almost two percent higher. Hong Kong rallied to end 2.38 percent up and Shanghai soared 4.89 percent.
The gains tracked advances in New York and Europe following a mixed bag of US data on retail sales and industrial output.
“There was a lot of data released overnight, but not a lot that really convinced us either way,” said Emma Lawson, a currency strategist at National Australia Bank in Sydney, in a note.
The Dow, S&P 500 and Nasdaq all soared more than one percent Tuesday, while London, Paris and Frankfurt also saw healthy gains.
With economists mostly tipping the US central bank to delay its first rate rise for nine years, higher-yielding, or riskier, currencies were given a boost — with the Singapore dollar up 0.18 percent and the Malaysian ringgit 1.40 percent higher.
South Korea’s won rallied 0.90 percent a day after its credit rating was increased by Standard & Poor’s.
The greenback was lower at 120.33 yen from 120.40 yen in New York.
Shanghai’s rally regained much of the six percent losses over Monday and Tuesday, although concerns remain about the world’s number two economy.
“The market has fallen too much in the past two days, so there has been an expectation of a rebound,” Zhang Gang, an analyst of the Central China Securities, told Agence France-Presse.
Soft readings Sunday on industrial output, retail sales and investment—combined with a contraction in factory activity and plunging producer prices—have fuelled fears the Chinese economy is heading for a hard landing.
Beijing’s decision to devalue the yuan last month reinforced fears the leadership is struggling to control the crisis, sending shockwaves through world markets.
A regulatory crackdown on accounts used for “illegal” trading and a police investigation of top executives of China’s biggest brokerage, Citic Securities, added to the earlier negative sentiment.
Police are investigating Citic executives, including general manager Cheng Boming, for insider trading and leaking inside information, the official Xinhua news agency reported Tuesday.
The market watchdog said Monday it has targeted more than 3,000 accounts for illegal trading, including using platforms that allowed margin trading outside regulators’ oversight.
Margin trading allows investors to use borrowed funds to trade stocks with only a small sum as deposit.
Oil prices extended gains from the previous day on signs of a slowdown in US production.
US benchmark West Texas Intermediate for October delivery was up 1.21 percent and Brent for November, a new contract, advanced 0.89 percent.