JCI Climbs With World Stocks and Commodities on Fed’s Bond Buying Pledge
The Jakarta Composite Index was up just over 2 percent on Friday to close at 4,237, representing an 86 point increase that followed a seven day Asian stock gain after the Federal Reserve said it will buy mortgage-backed securities to bolster economic growth.
The rally on the back of stimulus news rippled through Asian, and indeed, world markets, as global stocks rallied and commodities surged. The MSCI All-Country World index added 1.1 percent at 10:09 a.m. in London. Futures on the Standard & Poor’s 500 Index gained 0.3 percent after the equity benchmark yesterday rallied to its highest level since 2007. The S&P GSCI gauge of 24 commodities rose for a seventh day, gaining as much as 1 percent to its highest in five months.
Indonesia’s energy sector continued it’s rally after nearly a month on the decline. Bumi Resources was up almost 8 percent on Friday, while its subsidiary, Bumi Resources Minerals climbed 18.37 percent. Adaro Energy, Indonesia’s second largest coal producer (behind Bumi), was up 5 percent, while oil and gas exploration company Ratu Prabu Energi was also up just over 11 percent on Friday.
“The Fed’s statement made clear that this monetary easing will go on until employment growth is satisfactory,” said Akio Yoshino, chief economist in Tokyo at Amundi Japan Ltd., whose global parent has $897 billion of assets under management. “This time around we have a clear link between the economy and monetary policy, and that’s a very big thing. It should give powerful support for markets.”
The MSCI Asia Pacific Index added 2.4 percent to 123.90 as of 5:16 p.m. in Tokyo, set for its highest close since May 4. More than five stocks climbed for each that fell on the measure, which gained 4 percent this week, the biggest increase since December. Nine of the gauge’s 10 industry groups advanced.
The MSCI Asia Pacific Index rose 3.2 percent this quarter through yesterday as stimulus measures from Europe to China countered concerns about the euro zone’s debt crisis and a global economic slowdown. The Asian benchmark traded at 12.8 times estimated earnings, compared with 14.1 for the Standard & Poor’s 500 Index and 12 for the Stoxx Europe 600 Index.
Japan’s Nikkei 225 Stock Average rose 1.8 percent. Australia’s S&P/ASX 200 advanced 1.2 percent and New Zealand’s NZX 50 Index added 0.2 percent. South Korea’s Kospi index rose 2.9 percent as data showed the nation’s exports and imports gained in August from July.
The Shanghai Composite Index added 0.6 percent, while Hong Kong’s Hang Seng Index jumped 2.9 percent. Taiwan’s Taiex Index gained 2.1 percent and Singapore’s Straits Times Index increased 1.4 percent.
Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The index jumped 1.6 percent in New York yesterday to the highest close since Dec. 31, 2007, after the Fed said it will conduct open-ended purchases of $40 billion of mortgage debt a month.
The central bank will continue its purchases of mortgage-backed securities and undertake other asset purchases if the outlook for the labor market doesn’t improve substantially, the Federal Open Market Committee said yesterday. It also said it would probably hold the federal funds rate near zero “at least through mid-2015.”
“The Fed isn’t going to hold any punches back in trying to combat a slowdown,” said Prasad Patkar, a portfolio manager who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Risk appetite will improve in the short term not only because of what the Fed’s done, but also globally there seems to be enough motivation among policy makers in China and Europe to stimulate.”
Exporters to the US advanced. Techtronic climbed 8.2 percent to HK$13.72 in Hong Kong. Komatsu Ltd., a Japanese construction machinery maker that gets 23 percent of its sales in the Americas, rose 4.5 percent to 1,681 yen. James Hardie Industries SE, a building-materials supplier that depends on the US for two-thirds of its revenue, rose 2.9 percent to A$8.95 in Sydney.
Shares of resource companies gained after metals prices jumped. Zhaojin Mining surged 16 percent to HK$13.38 in Hong Kong after cash gold rose to its highest level since Feb. 29.
Sumitomo Metal Mining Co. gained 9.4 percent to 1,010 yen in Tokyo. In Sydney, miners BHP Billiton Ltd. rose 1.6 percent to A$33.31 and Rio Tinto Group advanced 2.8 percent to A$56.58.
Financial shares accounted for 36 percent of the advance in the Asia Pacific benchmark. Daewoo Securities soared 15 percent to 13,450 won and Korea Investment Holdings Co. jumped 14 percent to 42,000 won in Seoul. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank, rose 3.8 percent to 383 yen.
Among other stocks that rose, Sun Hung Kai Properties Ltd., Hong Kong’s No. 1 developer by market value, advanced 4.4 percent to HK$111.80 after its full-year underlying profit beat estimates.
In Sydney, Fortescue Metals Group Ltd. halted trading after its shares plunged 14 percent yesterday. Australia’s third- largest iron ore producer said it’s made progress in talks with lenders to restructure bank loans.