Asian stocks extend global rally on China optimism, STI up 0.28%

A man walking past an electronic board displaying graphs showing recent movements of the Nikkei in Tokyo on Sept 8, 2015.
A man walking past an electronic board displaying graphs showing recent movements of the Nikkei in Tokyo on Sept 8, 2015.PHOTO: REUTERS

SINGAPORE (BLOOMBERG, REUTERS) - Asian stocks joined a bounce back in global equities on Wednesday (Sept 9), with Japanese shares headed for their biggest gain in almost a year and high-yielding currencies climbing amid optimism that China will be able to stabilise its financial markets.

China major stock indexes rose in early trading, extending Tuesday's near 3 per cent gain. The CSI300 index rose 0.8 per cent to 3,359.98 points at 0138 GMT, while the Shanghai Composite Index gained 0.8 per cent to 3,194.83 points. The Hang Seng index in Hong Kong was up 1.8 per cent, to 21,630.75 points.

The MSCI Asia-Pacific Index had jumped 2.4 per cent by 10.06am in Tokyo. Japan's Topix index climbed 4.3 per cent, the most since June 2013, amid a third day of losses in the yen. Standard & Poor's 500 Index futures rose 0.3 per cent following the gauge's second-biggest one-day jump of 2015. The Australian dollar added 0.5 per cent to extend Tuesday's 1.3 per cent advance, while the ringgit rallied from a 17-year low.

Singapore stocks joined the rally when trading opened, with the Straits Times Index up 0.65 per cent at 2,904.00 as of 9am. But gains were pared and the index was up just 0.28 per cent to 2,893.32 as of 9.56am.

The Aussie dollar added 0.3 per cent to extend Tuesday's 1.3 per cent advance, while Malaysia's ringgit rose for the first time in six days. The yen traded near its weakest level this week and bonds from Japan to New Zealand fell as demand for haven assets abated.

The first increase in Chinese stocks in five trading days on Tuesday (Sept 8) sparked a relief rally in US and European shares. The gains, while likely engineered by regulators who have been intervening regularly in the market, soothed concern over China, which has fuelled gyrations in riskier assets the past month amid anxiety over its economic slowdown.

The Federal Reserve remains in focus, with traders firming bets on an interest-rate hike before the end of 2015 while odds of an increase at next week's meeting hold around 28 per cent.

"As long as China is stable and equity markets there aren't in free fall, markets will generally go higher," Mr Chris Weston, chief markets strategist in Melbourne at IG Ltd., said by phone. However, "we won't rule out more volatility ahead of the US meeting next week", he said, referring to the Fed's gathering from Sept 16-17.

The futures market is tipping more gains in Chinese stocks, with contracts on the FTSE China A50 Index up 0.8 per cent in recent trade, and those on the CSI 300 Index gaining 4.9 per cent. Futures on the Hang Seng Index in Hong Kong climbed 1.1 per cent in recent trade, while contracts on the Hang Seng China Enterprises Index, a gauge of mainland Chinese shares listed in the city, added 1.1 per cent.

China's efforts to curb volatility in its stock market have suppressed index futures trading, with volumes on contracts tracking the CSI 300 and CSI 300 Index sliding to a record low on Tuesday, down 99 per cent from their June highs. What was once the most active market for index futures as recently as July, according to the World Federation of Exchanges, has all but dried up after regulators raised margin requirements and tightened position limits.

The S&P 500 rallied 2.5 per cent on Tuesday, erasing Friday's 1.5 per cent retreat, while the Dow Jones Industrial Average gained 390 points, its steepest increase since Aug 26.

"The rebound in the Chinese equity market and rebound in key commodity prices helped lift the mood in markets generally," Ms Kymberly Martin, a markets strategist in Wellington at Bank of New Zealand, said in an e-mail to clients.