Japan and China leads Asian markets

Japan and China markets dominated the Asian session, as most regional bourses stayed in positive territory.

BOJ building
Source: Bloomberg

The Nikkei had been given a fresh shot of mojo earlier this week amid Greek optimism.

The Index did not disappoint, clearing out the strong barrier near 20650 yesterday and extended the rally to an 18-year high, almost reaching December 1996 highs.

The Nikkei is now targeting psychological 21,000 level today. Confidence in Japanese equities was received, support from the BOJ minutes released today, which signalled growing optimism in the economy.

Talks that we may see BOJ scaling back its stimulus programme on the basis that they are not expanding it, despite a subdued inflationary environment which were clearly background noise.

Governor Kuroda made it rather plainly clear that it is premature to discuss the end of the QQE scheme. The current state of affairs where economic outlook is improving and monetary authorities are contented with keeping ultra-accommodative conditions are spurring the liquidity trade. On that note, Japanese equities are the obvious beneficiaries.

Meanwhile, Mizuho Financial Group was the most active stock, with a trading volume of 318 million units, amounting for nearly 19% of the total average trading volume for the first three week of June.

News that the third largest bank in Japan reaffirmed its commitment to pare share ownerships in other companies in accordance to new Japanese governance rules, boosted sentiments in the counter. The stock has surged 34% year-to-date, more than the Nikkei 225’s near 20% increase, after raising its dividend and forecast profits.

In China, volatility reigned once again in the equity market, although the range of move was narrower compared to the previous session. The CSI 300 traded mostly in the positive on Wednesday, whereas smaller-cap shares came under heavier selling pressure. The ChiNext closed down 0.3%.

Broadly speaking, the Chinese markets are entering an adjustment phase, so we could continue to see large fluctuations in price action. Investors will still keep an eye on possibly more clampdown on margin trading. The good news is that IPO-related liquidity drain should take a breather for the rest of June given a light IPO schedule.

This means we could see some good support for Chinese indices in the coming sessions. Nevertheless, it may be prudent to watch out for an increase on insider selling, which would induce a widespread bearish mood. In the longer term, I expect to see China shares transit into a slow and stable bull market. Until then, we would anticipate more volatility.

Singapore pushing higher

With a large dose of Greek optimism, the Straits Times Index (STI) advanced further today, alongside Asian bourses. The Index briefly tested above 3350, but failed to follow through, with the 200-day moving average barrier deterring bulls. What was notable was Noble’s ability to maintain above the SGD 0.70 mark.

A key shareholder of the commodity trader, China Investment Corp, voiced support for the company, which contributed to the demand today. Furthermore, another 14 million units share purchase by Noble also shore up the stock price, and brought the recent buyback to almost 120 million shares (1.8% of total equity). However, the continuous share buybacks may affect the liquidity of the counter, which could turn off some investors.

Greece is still in the limelight

There is no doubt that Greece remains very much in the headlines with focus shifting to the Eurogroup meeting today, ahead of tomorrow’s EU leaders’ summit. Apart from securing an agreement between Greece and its creditors sometime this week, Greek PM Tsipras also need to drum up domestic political support for the deal.

The parliament in Athens will be voting on the proposal over the weekend if Greece and the troika reached an accord. As usual, the market always seems to have something to worry about. The Eurozone capital markets will stay on high alert throughout the week and beyond.

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