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Asian Markets at Close Report

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Jul 12, 2016

Asian Markets at Close Report , by MarketWatch on July 12, 2016.

Dominique Fong

Stocks in Japan were on a roll for a second straight day on Tuesday, led by another surge in Nintendo on the back of global mania for its “Pokémon Go” app, and as hopes build for fresh fiscal stimulus.

Japan’s Nikkei Stock Average NIK, +2.46%  up 2.5%, extending Monday’s 4% gain. The yen’s continued weakening eased worries that a persistently strong currency would make Japanese exports less competitive.
The positive momentum in Japanese equities came as investor confidence rose in Prime Minister Shinzo Abe’s ruling coalition—and its ability to execute policies—after the coalition on Sunday increased its control of parliament’s upper house.
Anticipation was also growing that Abe would soon introduce fresh fiscal stimulus to jolt the stagnant economy. This has tilted traders back to risk, particularly given the S&P 500’s SPX, +0.34%  to a record high in the U.S. overnight.
Buying interest remained high for shares of videogame maker Nintendo 7974, +12.73% which has a minority stake in the augmented-reality game “Pokémon Go.” Nintendo added 13% Tuesday in a sign of hope for its mobile-games business, after rising 25% the previous session.
Elsewhere in the region, Australia’s S&P/ASX 200 XJO, +0.30%  rose 0.3%, Korea’s Kospi SEU, +0.14%  climbed 0.1% and Hong Kong’s Hang Seng Index HSI, +1.65% added 1.7%. China’s Shanghai Composite Index SHCOMP, +1.82%  1.8% higher.
But the main focus was on Japan, where investors waited for details from Abe’s pledge that his cabinet would start drawing up a stimulus package on Tuesday. Speculation was also rife that the subjects discussed during a meeting Tuesday between former U.S. Federal Reserve Chairman Ben Bernanke and Abe would include a radical measure known as “helicopter money”—in which a central bank directly funds government spending—which would have a big depreciating impact on the yen.
Bernanke urged Abe to defeat deflation, according to Abe adviser Koichi Hamada, who left it vague whether helicopter money came up.
As recently as last week, fears about repercussions from the U.K.’s vote to leave the European Union led investors to pile into the yen USDJPY, +1.51%  a haven, pushing it close to the ¥100-to-the-dollar mark. But the yen recently weakened to ¥103.42 on the prospect of economic stimulus. A weaker yen typically buoys the stock market, but traders were unsure whether this rally is sustainable.
“There’s still a lot of uncertainty about policy and what’s going to happen,” said Stephen Innes, a senior trader at Oanda Asia Pacific. “I don’t know if this is enough to turn around the momentum on dollar/yen...Brexit is not out of the woods.”
In China, coal and steel shares led gains, spurred by the belief that Beijing’s efforts to reduce excess production in heavy industries are beginning to work. A few companies, including China Coal Energy Co. 1898, +7.35% revealed improving revenue projections for the first half of this year. Shares of coal miner Inner Mongolia Pingzhuang Energy Resources Co. 000780, +9.96%  10%, the maximum price gain allowed in a day in China.
“The rally this week is largely driven by supply-side-reform expectations, but overall the Shanghai market should trade around [the] 3,000 level in the short term,” said Xiao Shijun, an analyst at Guodu Securities in Beijing. It finished Tuesday at 3,049.38.
In other markets, China’s central bank guided the yuan USDCNY, -0.1315%  its weakest level in more than 5½ years. The yuan’s reference point was set at 6.6950 against the U.S. dollar, the highest level for the dollar since October 2010. Analysts expect the People’s Bank of China to ease policy again soon.