TOKYO: Japan’s Nikkei Stock Average jumped the most in nearly seven years on Wednesday, as a rebound in regional markets, especially China’s, encouraged investors to scoop up sharply devalued stocks.
The Nikkei Stock Average surged 7.7%—or 1343.43 points—to 18,770.51, marking the benchmark’s biggest daily percentage-gain since October 2008. In point terms, it was the biggest gain since January 1994.
Japan’s market had fallen as much as 16% from its late June peak, pulled down by a huge selloff in the Chinese market, and by declines in global markets in August. Volatility in Shanghai stocks and China’s yuan devaluation last month amplified investor worries that China’s slowdown was worse than the government was letting on.
But an end-of-day rally in China stocks Tuesday lifted sentiment in the U.S. overnight and across Asia Wednesday. The Chinese government has also rolled out a series measures to address its deteriorating economy, which is encouraging investors to buy again. In the aftermath of the Nikkei’s 2.4% drop Tuesday, analysts had commented that Japanese stocks were unfairly tainted by the region’s post-June rout.
As of the Tuesday close, shares of Japanese companies traded at 14.9 times their earnings, compared with 17.9 times in the U.S. and 15 times in Germany, according to data provider Quick.
“It has been difficult to enter [Japan stocks] because the market kept falling,” said Naoki Fujiwara, fund manager at Shinkin Asset Management. But Mr. Fujiwara said that stabilization in the Shanghai market and gains in markets abroad means it is now “good timing to buy.”
The Shanghai Composite Index closed up 2.2% Wednesday, adding to its 2.9% gain Tuesday. The benchmark bottomed out in late August, when it was down more than 40% from its June peak. Elsewhere, the Hang Seng Index was up 3.6%, South Korea’s Kospi gained 3% and Australia’s S&P ASX 200 was up 2.1%.
The rebound in China came after China’s finance ministry said Tuesday evening that the country would roll out a “more forceful” fiscal policy to stimulate economic growth, which it said faced downward pressure.
The Ministry of Finance said in a statement that it would allocate more funds to support some infrastructure projects and implement tax cuts for small businesses. It also said it would accelerate the approval process for duty-free stores to boost construction.
“Authorities [have] released a slew of policies aimed at rebuilding investor confidence by introducing mid-to-long term market-regulating measures,” said Jacky Zhang, an analyst at BOC International. Beijing has approved nearly 200 billion yuan ($31 billion) of infrastructure projects since July, according to an article by state-owned Securities Daily Wednesday. Those measures were helping shake off worries over disappointing Chinese trade data announced Tuesday.
China’s exports fell 5.5% in August from a year earlier in dollar terms, according to the General Administration of Customs, while imports dropped 13.8%. While analysts said the data weren’t surprising, the figures underscore how China’s economic slowdown is affecting trade, particularly for countries that focus their exports on Chinese demand.
“Any signal that [China’s] government is going to do more to support growth is going to help sentiment,” especially measures on top of monetary easing, added Bernard Aw, market analyst at IG.
In currencies, the Malaysian ringgit strengthened by 0.5%, after having hit a string of 17-year lows recently. It traded as weak as 4.3695 against the U.S. dollar Tuesday. The Australian dollar strengthened by 0.4% to trade at $0.7040, its highest in days.
In Hong Kong, Power Assets Holdings Ltd. led gains after the company announced a planned merger with Cheung Kong Infrastructure Holdings Ltd. Shares of the two firms gained 6.1% and 2.9%, respectively.
