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Asia markets presented a mixed picture on Friday. The Japanese Nikkei 225 defied the trend, surging past the significant 41,000 barrier for the first time before settling slightly lower. The morning session closed at 40,992, representing a gain of 0.43%.
This bullish run in the Nikkei can be attributed to several factors. Firstly, investors remain confident that the Bank of Japan (BoJ) will maintain its current ultra-low interest rate policy. This stance weakens the Yen, making Japanese exports more competitive and boosting the Nikkei, which is heavily weighted towards export-oriented companies.
Secondly, comments from BoJ Governor Kazuo Ueda on Thursday reiterating accommodative monetary policy further fueled investor optimism. This means the BoJ is unlikely to raise rates in the near future, keeping borrowing costs low for businesses and consumers.
Asia Markets: Financial and Tech Stocks Lead the Charge
Financial and technology stocks were at the forefront of the Nikkei’s rally. Sumitomo Mitsui Financial Group (8316) and Mitsubishi UFJ Financial Group (8306) witnessed significant gains, extending their positive momentum from the previous day. Softbank Group (9948) and Tokyo Electron (8035) also joined the uptrend.
Even with inflation concerns simmering, with Japan’s annual core inflation rate accelerating to 2.8%, the market remained largely unfazed. This suggests investors believe the BoJ will prioritize economic growth and avoid tightening monetary policy too aggressively, thereby preventing an overly strong Yen that could dampen inflationary pressures.
USD/JPY Eyes 152 but Falls Short
The USD/JPY currency pair climbed 0.12% to 151.784, inching closer to the psychological level of 152. However, speculation of a potential intervention by Japanese authorities to weaken the Yen and prevent further appreciation kept the USD/JPY below the 152 mark, despite its eight-day winning streak.
Hang Seng and ASX Struggle
In contrast to the Nikkei’s exuberance, broader Asian markets ended the week on a negative note. The Hang Seng Index in Hong Kong reversed course from Thursday’s gains, dropping 1.69% to 16,577 in the morning session. Real estate and technology stocks were the primary culprits behind the decline.
The Hang Seng Mainland Properties Index (HSMPI) and Hang Seng Tech Index (HSTECH) suffered significant losses, falling 2.40% and 2.74%, respectively. Tech giants Alibaba (9988) and Tencent (0700) alongside property developer Country Garden (2007) all experienced price drops, likely in anticipation of Country Garden’s upcoming earnings report next week.
The Australian market also faced headwinds, with the ASX 200 dipping 0.37% to 7,753. Similar to the Hang Seng, banking stocks weighed heavily on the ASX 200. National Australia Bank (NAB), Westpac Banking Corp (WBC), ANZ Group Holdings (ANZ), and Commonwealth Bank of Australia (CBA) all closed the morning session lower.
This bearish sentiment might be attributed to the RBA Financial Stability Review, which highlighted potential risks of rising non-performing loans for Australian banks. The AUD/USD currency pair also reflected this cautious mood, falling 0.30% to $0.65504.
Conclusion
The Nikkei’s stellar performance in contrast to the struggles of the Hang Seng and ASX underscores the influence of central bank policies on investor sentiment. While Japan’s accommodative monetary stance continues to fuel the Nikkei, concerns about future loan losses and a potential property market slowdown are casting a shadow over the Hang Seng and ASX. The coming week will be crucial, with Country Garden’s earnings report potentially impacting the Hang Seng, and ongoing economic data releases providing further insights into the trajectory of Asia markets.
