SINGAPORE: Most major Asian markets advanced on Thursday morning, taking cues from overnight gains in U.S. equities that followed a rise in oil prices, but Chinese stocks continued to sell off.
Australia’s ASX 200 was up 0.83 percent, led by a gain of 4.05 percent in the energy sub-index. Japan’s Nikkei 225 added 1.98 percent, extending gains from the previous two sessions on the back of a relatively weaker yen. Across the Korean Strait, the Kospi climbed 0.47 percent.
The Shanghai composite was down 0.46, after falling as much as 4 percent at one point in the previous session. The Shenzhen composite fell 0.37 percent.
Hao Hong, chief strategist and head of research at BOCOM International, told CNBC Wednesday’s market moves were explained by a “large shortage of liquidity this month, created by tax payment and medium-term lending facility (MLF) [contracts] due.”
The People’s Bank of China did a seven-day reverse repurchase agreement of 250 billion yuan on Wednesday, which Hong said was not enough to offset the shortage. Still, he said the prospects of imminent monetary stimulus were limited given the relative strength of the housing market.
On Monday, data showed China’s home prices in 70 major cities increased 4.9 percent on-year in March.
Hong explained it is likely that the PBOC is “watching the property price surge very closely, and is giving property price much weight in making monetary policy,” which further makes it unlikely that the the Chinese central bank will ease in the near term. “It has chosen to use shorter term liquidity tools instead.”
Oil prices retreated during Asian hours, with global benchmark Brent lower by 0.79 percent at $45.44, after settling up 4 percent overnight. The May front-month contract for U.S. futures finished up 3.8 percent at $42.63 during U.S. hours before expiring. On Wednesday, 10:13 a.m. HK/SIN time, the June front-month contract for U.S. futures was down 0.81 percent at $43.82 a barrel.
Analysts point to the overnight gains in oil as a factor for higher finish in U.S. stocks on Wednesday.
“Oil prices remain the main driver for markets,” said Rodrigo Catril, a currency strategist at the National Australia Bank, “It has been the case this week, [and] the assessment of good news continue to prevail over bad ones.”
Reuters reported data from the U.S. Energy Information Administration showing a 2.1 million barrel rise in crude stocks last week, lower than a forecast for a 2.4 million-barrel rise. Oil prices previously retreated during Asian hours Wednesday after the reported end of a strike in Kuwait, which affected the OPEC producer’s daily production numbers.
Energy plays in Asia advanced in morning trade, with shares of Santos jumping 7.36 percent, Woodside Petroleum up 4.53 percent, Inpex gaining 3.96 percent and South Korea’s S-Oil up 1.24 percent. Mainland Chinese shares of Sinopec advanced 0.58 percent.
In the currency market, the dollar strengthened against a basket of currencies overnight, with the dollar index finishing at 94.492, compared with the 93 handle it briefly touched in the previous session. As of 10:16 a.m. HK/SIN time on Thursday, the index was at 94.535.
“The strength in the dollar has not only been aided by the jump in U.S. yields, euro and yen weakness have also played a hand,” said Catril.
The euro traded at $1.1295 overnight, while the yen was at 109.83 to the dollar after touching the 107 level earlier this week. Thursday morning, the dollar/yen pair was down 0.12 percent at 109.70.
The relative weakness in the yen sent export stocks in Japan higher, with shares of Toyota advancing 2.43 percent, Nissan up 2.31 percent and Honda higher by 2.10 percent.
Shares of Mitsubishi Motors were flooded with sell orders on Thursday morning, according to Reuters, and were not yet trading. This follows news on Wednesday, where the Japanese automaker admitted it falsified fuel economy test data to make emissions levels look more favorable.
Elsewhere, the Australian dollar traded at $0.7797 as of 10:17 a.m. HK/SIN time, compared with a level of $0.78 reached briefly during Asian hours on Wednesday. The overnight decline in the Aussie came despite advances in commodities.
Australian banking stocks advanced on Thursday, with the ASX 200’s heavily weighted financials subindex adding 0.52 percent. The country’s so-called Big Four banks – ANZ, Commonwealth Bank of Australia, Westpac and NAB – were up between 0.44 and 1.36 percent.
In the previous session, the Big Four saw some sell-off in the afternoon. Angus Nicholson, a market analyst at IG, said if the banks “begin to fall out of favor again, it will make it very difficult for the ASX to hit [the] 5,300 given their heavy market capitalization weighting.”
On Wednesday, the benchmark index closed above the 5,200 level for the first time since January.
Overnight, an advance in oil prices sent U.S. stocks higher, with the Dow Jones industrial average adding 0.24 percent, the S&P 500 higher by 0.08 percent and Nasdaq composite up 0.16 percent.
