Asian stocks rebound as investors seek bargains

People are reflected in a display showing market indices outside a brokerage in Tokyo, Japan, Feb 10, 2016.
People are reflected in a display showing market indices outside a brokerage in Tokyo, Japan, Feb 10, 2016. PHOTO: REUTERS

Tokyo leads rally with surge of 7.2% after last week's plunge; Shanghai the only downer

Asian shares rebounded strongly yesterday, as investors finally decided that it was time to plunge in and hunt for bargains after weeks of heavy selling.

The rally was led by Tokyo, which last week fell more than 11 per cent - its worst weekly drop since 2008. It clawed back some of the ground it lost, surging 7.2 per cent yesterday.

Mr Andrew Clarke, the Hong Kong-based director of trading at Mirabaud Asia, told Bloomberg News: "Japan is massively oversold. Everyone is scrambling to get back in. Long-only investors are coming in, along with retail and hedge funds."

Long-only investors refer to traders buying shares in the belief that they will rise in value.

A little nudge from Wall Street also helped, with the Dow Jones Industrial Average closing 2 per cent higher last Friday on big gains in banking and energy plays.

This put Asian investors in a cheery mood as they started the trading week yesterday.

Following Tokyo's positive lead, Singapore climbed 67.95 points, or 2.68 per cent, to close at 2,607.9.

Hong Kong jumped 3 per cent, Seoul gained 1.5 per cent and Sydney advanced 1.6 per cent.

The only downer was Shanghai, which declined 0.6 per cent as investors returned to the market after the Chinese New Year break and replayed some of the carnage that hit bourses across the rest of the region last week.

But the drop was not as severe as what some analysts were fearing last week, and not bad at all considering that the Chinese government yesterday released January trade data that was weaker than expected.

Shanghai had started the day down more than 2 per cent, but the strong recovery across Asia and a strengthening of the yuan perked up the market.

"Many traders exited their positions ahead of the holiday, and the weak opening gave them a chance to buy back some shares," said Mr David Dai, the Shanghai-based investor director at Nanhai Fund Management, in an interview with Reuters.

Traders were also soothed by comments from Chinese central bank governor Zhou Xiaochuan, who told Caixin magazine at the weekend that there was no basis for a continued depreciation of the yuan, as China's balance of payments is good, capital outflows are normal and the exchange rate is basically stable against a basket of currencies.

Still, analysts believe this may not necessarily be the end of the market turmoil.

"We may see a short-term rebound but I think we are not out of the woods yet," said NRA Capital research director Liu Jinshu. "The economic indicators in the first quarter of the year continue to be weak - the Chinese economy is slowing down and oil prices have fallen."

Oil prices resumed their decline yesterday, again falling below US$30 a barrel as Iran restarted exports to Europe and Chinese trade data showed that its crude imports dropped 20 per cent last month.

Following Tokyo's positive lead, Singapore climbed 67.95 points, or 2.68 per cent, to close at 2,607.9.

A version of this article appeared in the print edition of The Straits Times on February 16, 2016, with the headline 'Asian stocks rebound as investors seek bargains'. Print Edition | Subscribe