HONG KONG: A wave of confidence swept through Asian markets on Wednesday, led by a soaring Tokyo, and extending the previous day’s broad global advance to raise hopes that recent China-fuelled losses may be coming to an end.
Investors dumped assets considered safe bets and piled into riskier prospects, with the Japanese yen sinking against the dollar and euro, while the Australian dollar recovered from six-year lows and emerging market currencies got much-needed support.
Big gains on stock markets—Tokyo shot up 7.71 percent—come after weeks of being hammered by concerns about slowing growth in China, whose economy is worth more than 13 percent of global GDP.
Decades of rapid growth in China have been spurred by huge exports and massive state spending, but commentators say Beijing needs to retool to boost domestic consumption if its economy is to continue to grow.
Fears over the communist authorities’ ability to manage this transition have sent wobbles through financial markets around the world, where China has been a bright spot on an otherwise gloomy horizon.
Suggestions that Beijing had stepped in to shore up mainland shares on Tuesday sent Shanghai and Hong Kong higher.
An announcement by the country’s finance ministry that it would accelerate major construction projects and cut taxes for small and medium-sized enterprises to support growth also appeared to be adding to the positive mood, some analysts said.
“The gains in Chinese shares helped calm markets down and investors believe that China
will have more fiscal policies, not only monetary, to stabilize the economy,” Thebes Lo, Hong Kong- based vice president at Kim Eng Securities Ltd., said.
“Risk appetite is back a little bit.”
Japan’s Nikkei led the charge on Wednesday, registering its biggest one-day rise in seven years.
But illustrating the continued volatility, that tub-thumping rise came after a fall on Tuesday that had erased the last of its gains for 2015.
“The sell-off in Japanese equities has been excessive amid concerns over China’s economic slowdown,” said Khiem Do, at Baring Asset Management. “Today’s rally can be sustained once the market’s perception of the Chinese economy improves.”