Asian stocks surge on central bank stimulus hopes

Pedestrians are reflected on a share prices board in Tokyo. (Photo: AFP/Yoshikazu Tsuno)

HONG KONG: Asian stocks soared with oil and emerging currencies on Friday (Jan 22), after Europe's top banker hinted at fresh stimulus measures in the face of a global market rout and a report said Japan's central bank was considering similar moves.

After a sell-off that has wiped several trillion dollars off global markets so far this year, the prospect that two of the world's biggest central banks were ready to finally step in gave investors something to cheer about.

On Thursday, European Central Bank boss Mario Draghi highlighted concerns about the impact of plunging equity and oil prices on already weak inflation and pledged to reconsider its monetary policy at its March policy meeting.

"We have the power, willingness and determination to act," he told a news conference. "There are no limits how far we are willing to deploy our policy instruments." His comments lit a fire under European stocks and also supported a Wall Street rally.

On Friday, Japan's Nikkei business daily reported that the central bank is weighing up its own plans to fend off the threat of deflation that has been exacerbated by the oil crisis. The latest developments spread some much-needed confidence around trading floors after the worst-ever start to a year.

Tokyo led the gains, surging 5.9 per cent, the best one-day performance since early September, with a weaker yen helping exporters. Hong Kong ended 2.9 per cent higher and Shanghai added 1.3 per cent. Singapore closed 1.75 per cent higher.

‘CAVALRY RESCUE’

"The cavalry might be coming to the rescue in terms of the central banks starting to sound more dovish," Shane Oliver, head of investment strategy in Sydney at AMP Capital Investors, told Bloomberg TV. "There's a little bit of light at the end of the tunnel. We've probably seen the worst and by the end of the year things will be a lot brighter than they are now."

Oil prices also extended gains to climb above US$30 a barrel, having soared more than four per cent on Thursday on the back of Draghi's comments and a report showing US inventories rose less than expected last week.

US benchmark West Texas Intermediate added four per cent and Brent was up 4.8 per cent.

However, the two contracts remain around 12-year lows owing to a supply glut, weak demand, overproduction and a slowdown in the global economy. Earlier this week, WTI fell below US$27 at one point and Brent went sub-US$28.

Energy stocks surged. Hong Kong-listed CNOOC soared 8.1 per cent and PetroChina climbed 7.9 per cent.

The positivity also seeped into currency markets as investors shifted out of assets considered safe havens. The dollar slipped against most emerging market units, with the South Korean won up 1.1 per cent, Indonesia's rupiah gaining 0.4 per cent and the oil-dependent Malaysian ringgit up 1.6 per cent.

The dollar advanced against the yen, which is the go-to currency in times of turmoil and uncertainty. The greenback edged up to 118.05 yen - having tumbled more than two per cent against the Japanese unit this year.