HONG KONG (MarketWatch) — Asia shares posted a strong rally Friday after the Federal Reserve unveiled a fresh round of quantitative easing, with South Korean equities also getting a boost from a credit rating upgrade.
“This was what we expected, and in the short term, it’s good for the markets, but in the long term, inflation may be a problem” said Peter Lai, a director at DBS Vickers in Hong Kong, referring to the Fed’s decision to announce a third round of its quantitative easing program, or QE3, to support the U.S. economic recovery.
“It shows that the authorities will support the economy, and it gives investors confidence,” Lai said. Read analysis on what QE3 means for Asia.
The Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.64% jumped 2.9% in Seoul and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.60% also climbed 2.9%, while Taiwan’s Taiex added 2.1%.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.44% advanced 1.8%, Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -0.34% gained 1.3% and China’s Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 -0.90% added a more modest 0.6%.
The Shanghai index was also the only one among the six benchmark to end the week lower, with a mild 0.2% loss. The other markets jumped between 1.5% and 4.2%, with Taiex and Hang Seng tied at the top.
The gains came after the Fed said Thursday it would purchase $40 billion of mortgage-backed securities every month until the labor market improves. Interest-rate settings were kept at record lows, as expected, with the Fed extending the expected time frame for the ultra-loose rates to mid 2015. Read more on QE3.
“With a strong commitment from the Fed, progress in Europe and the passing of the U.S. election, the U.S. economy will have a pretty decent shot at achieving above-trend growth in 2013,” said Julia Coronado, an economist at BNP Paribas.
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Among blue-chips making ground in Japan, Sony Corp. /zigman2/quotes/201361720/delayed JP:6758 -1.18% /zigman2/quotes/208567357/composite SNE -1.40% rising 3.5% and Canon Inc. /zigman2/quotes/207639533/delayed JP:7751 -1.55% /zigman2/quotes/210242912/composite CAJ -0.70% climbing 3.6%.
Nintendo Co. /zigman2/quotes/208063194/delayed JP:7974 +1.85% /zigman2/quotes/201616881/delayed NTDOY +1.71% put on 2.3% a day after launching its latest Wii videogame device. View a slideshow of Nintendo's new Wii.
Seven & I Holdings Co. /zigman2/quotes/207666111/delayed JP:3382 +0.36% /zigman2/quotes/203868267/delayed SVNDF -2.04% bucked the upbeat trend in Tokyo, dropping 2.4% after a Nikkei business daily report said the retailer is set to post its first drop in operating profit in three years. Read more on Seven & I Holdings.
Exporters bounced in Seoul as LG Display Co. /zigman2/quotes/204226570/delayed KR:034220 +1.07% /zigman2/quotes/204466928/composite LPL -0.85% climbed 4.8% and Samsung Electronics Co. /zigman2/quotes/209800866/delayed KR:005930 -1.48% /quotes/zigman/203012110/realtime SSNGY 0.00% firmed by 2.7%.
Financials were also strong across Asia.
Mitsubishi UFJ Financial Group Inc. /zigman2/quotes/207520099/delayed JP:8306 -0.41% jumped 3.8% in Tokyo, while investment bank Macquarie Group Ltd. /zigman2/quotes/206727308/delayed AU:MQG -1.69% /zigman2/quotes/209628452/delayed MQBKY -2.17% added 2.5% in Sydney.
In Seoul, financial stocks were also bolstered by Standard & Poor’s upgrade of its long-term credit rating by one notch to A+, to reflect a “less negative assessment of the geopolitical risks on the Korean peninsula” after what it called was a smooth change of leadership in North Korea.
Shares of KB Financial Group Inc. /zigman2/quotes/200043823/composite KB -2.25% jumped 4.3% and Hana Financial Group Inc. spiked 7.1%.
In Hong Kong, China Construction Bank Corp. /zigman2/quotes/208974133/delayed HK:939 -2.42% rose 2.2% and China Life Insurance Co. /zigman2/quotes/202359856/delayed HK:2628 -4.40% /zigman2/quotes/206573290/composite LFC -3.83% rallied 4.3%.
Deutsche Bank strategist Esther Chwei named China Life her top pick among Chinese insurers, saying the fundamentals of the sector have improved and “favorable government policies, such as deferred tax annuity, should underpin medium-term growth.”
Expectations that the Fed’s monetary easing would boost commodity prices buoyed resource stocks.
In the energy sector, Inpex Corp. /zigman2/quotes/206689846/delayed JP:1605 -2.66% /zigman2/quotes/207958170/delayed IPXHY -0.33% rallied 5.9%, and Oil Search Ltd. /zigman2/quotes/204702973/delayed AU:OSH -2.03% /zigman2/quotes/205045633/delayed OISHY -1.46% put on 1.6% in Sydney.
Oil futures jumped following the Fed’s stimulus plans, and as geopolitical tensions in the Mideast and Africa sparked supply fears. Read more on oil.
Gold prices also surged on the Fed’s stimulus moves, helping Australian gold major Newcrest Mining Ltd. /zigman2/quotes/203840223/delayed AU:NCM -1.47% /zigman2/quotes/203286036/delayed NCMGY -2.14% surge 7.3% in Sydney. Read more on gold futures.
Also in Sydney, shares of Fortescue Metals Group Ltd. /zigman2/quotes/202351558/delayed AU:FMG -2.21% /zigman2/quotes/207124211/delayed FSUGY -2.69% were halted after a 14% slump on Thursday, amid discussions between the iron-ore miner and its lenders over debt restructuring. The company said it would make an announcement regarding its debt facilities by Tuesday.