Asian Stocks Edge up After Japan Policy Boost

Asian investors on their despite Bank of Japan’s surprise policy easing and the downward trajectory of oil prices.

Asian stocks started a new month on a cautious note on Monday, with the Bank of Japan’s surprise policy easing sparking some buying but further signs of economic weakness in China and a fall in oil prices keeping investors on guard.

The greenback continued to benefit from the growing monetary policy divergence between the US and its counterparts in Europe and Asia while bonds, especially investment grade debt, received a boost after Japan’s surprise decision to introduce negative interest rates last week.

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, after losing 8 percent in January.

Australia and Japan leading regional markets with gains of more than 1 percent each, while Chinese stocks slipped in early trade.

In the short term, the surprise move by Japan will be a catalyst for global equities but it only underlines the weakness of the global economy and we need to see some strong economics data for a sustainable rally.

Cliff Tan, Head of Global Markets Research, Bank of Tokyo-Mitsubishi UFJ

Monday’s batch of economic data from China added to worries about the health of the world’s second-largest economy and only increased calls for more policy easing from China.

Activity in China’s manufacturing sector contracted at its fastest pace in almost three-and-a-half years in January, missing market expectations, while growth in the services sector slowed, official surveys showed on Monday.

The Shanghai Composite Index eased 0.8 percent in early trade, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen fell 0.6 percent. January was the worst monthly performance for the Shanghai market since the 2008 crisis with more than a 10 percent loss.

The Bank of Japan said it would charge for a portion of bank reserves parked with the institution, an aggressive policy pioneered by the European Central Bank (ECB). Earlier in January, the ECB indicated it could cut rates further in March.

The fact that both the BOJ and the ECB suddenly showed additional easing stance after the markets’ rout suggests policymakers in Japan and Europe share concerns and take actions.

Masafumi Yamamoto, Chief Currency Strategist, Mizuho Securities