Japan’s Nikkei Stock Average NIK, +0.66% closed up 0.7%, having reached its highest level since last December at 19,439.97 points earlier in the session. Elsewhere, Australia’s S&P/ASX 200 XJO, -0.10% ended 0.1% lower, Korea’s Kospi SEU, +0.27% finished up 0.3%, and Hong Kong’s Hang Seng Index HSI, -0.18% closed down 0.2%.
“The equity market is fast digesting the hawkish tone from the federal Reserve … and they are looking ahead,” said Margaret Yang, a market analyst at CMC Markets. The market is anticipating a brighter outlook in the U.S. economy and the changes President-elect Donald Trump’s administration could bring, she said.
On Thursday, stocks across the region declined sharply after the U.S. Federal Reserve raised interest rates for the second time in a decade. Rising U.S. rates typically increase funding costs for Asian companies in dollars, and trigger capital flight by regional investors back to the States in search of higher yields.
However, the “knee-jerk” reaction yesterday to the Fed decision was overdone, said Andrew Sullivan, managing director of sales trading at Haitong International Securities.
In Japan, the Topix bank subindex ended up 1.7% at a three-day high, as investors flocked to financial stocks after the Fed decision.
Japan financials are benefiting from rising yields for global government bonds, in which they invest heavily.
The yield on 10-year Japanese government bonds TMBMKJP-10Y, +7.34% rose to 0.100% on Friday for the first time since Jan. 29, the day when the Bank of Japan announced its negative interest rate policy.
The yield on the benchmark 10-year Treasury note TMUBMUSD10Y, -1.51% settled at 2.58% Thursday in U.S. trade, compared with 2.523% Wednesday. This marked the yield’s highest close since September 2014.
Meanwhile, the yen USDJPY, -0.05% drifted between gains and minor losses against the U.S. dollar following the decision Wednesday by the Federal Reserve to raise U.S. interest rates.
The yen is on a clear weakening path, down 13.1% against the dollar since the U.S. election on Nov. 8, and crossing above the ¥118 level on Friday. That is supporting the share prices of Japan’s exporters. A weaker yen makes Japanese exports more competitive.
Among auto makers, Mitsubishi Motors 7211, +1.98% closed up 3.2%, Mazda Motor 7261, +1.86% was up 1.9% and Nissan Motor 7201, +0.99% added 1%.
If the yen averages ¥115 against the dollar, profits could surge by as much as 20%, compared with the consensus by forecasters of 9% to 10%, said Jesper Koll, head of asset management WisdomTree Japan, in a note.
China has installed weapons on all seven of the artificial islands it has built in disputed water of the South China Sea, according to a U.S. think tank’s analysis of satellite imagery.
Chinese stock markets managed to eke out gains after early losses, with the Shanghai Composite Index SHCOMP, +0.17% closing up 0.2%, the Shenzhen Composite Index 399106, +0.95% closing up 1.0% and the smaller ChiNext Price Index 399006, +1.13% ending 1.1% higher.
China’s central bank has pumped 600 billion yuan into the financial system over the past two days, stabilizing the bond and stock markets, the state-run Securities Daily said. The move followed an unprecedented plunge of the bond futures market that triggered a temporary trading halt Thursday.
Jitters are returning to the Chinese markets after months of stable trading and low volatility. Still, after the rout in the stock market Monday when the Shanghai main board fell nearly 2.5%, the index hasn’t closed up or down more than 1%, signaling domestic equities have stabilized.
In the bond market, however, the yield on China’s benchmark 10-year government bond AMBMKRM-10Y, +4.07% rose sharply Friday. It was most recently indicated at 3.333%, its highest level since September 2015.