By V. Phani Kumar, MarketWatch
HONG KONG (MarketWatch) -- Japanese shares ended modestly higher
Friday after a roller-coaster ride that subjected the Nikkei Stock
Average to a swing of more than 3% on both sides of the previous
day's close.
Other regional markets ended mixed after also charting a choppy
course, with Australian stocks tumbling as banks and resource
stocks skidded amid concerns about the outlook for the local and
Chinese economies.
The Nikkei finished the day 0.9% higher in Tokyo, a day after it
plunged 7.3% for its worst drop since a disastrous earthquake and
tsunami struck the country in March 2011.
After opening solidly higher, the benchmark slumped in afternoon
trading on a wave of selling, as remarks from the governor of the
Bank of Japan failed to ease concerns about a rise in
government-bond yields. The drop coincided with a steep rise in the
yen after BOJ Gov. Haruhiko Kuroda said stability in the country's
debt markets was "extremely desirable."
"He is trying to make money cheaper, but [the] Japanese
government bond yield is going the other way, and he hasn't said
how he's going to stabilize bond-market yield. ... That's worrying
the market," said Kim Eng Securities director of sales trading
Andrew Sullivan.
The Nikkei's slump on Thursday had came against the backdrop of
extreme volatility in the bond market, which forced the Bank of
Japan to step in and offer funds to soothe investor nerves. The
yield on the 10-year Japanese government bond (JGB) yield rose to
1% Thursday before recovering, even as the Bank of Japan last month
announced plans to buy JGBs on an unprecedented scale -- a move
intended to lower yields and borrowing costs.
On Friday afternoon, the 10-year yield was at 0.835%.
However, some analysts said the bond market was functioning
properly, despite worries about yields.
"We see the robust stock rally, weaker-yen trend and emerging
sentiment that a 2% inflation rate within two years looks somewhat
achievable as the sources of the recent yield upswing... we reject
the view that the market is not functioning property," Royal Bank
of Scotland economists led by Junko Nishioka wrote in a note to
clients.
They estimated that the 10-year JGB yield will move in a core
range of 0.65% to 0.95% over the next six months, "with the yield
trading in the upper half of this range until market volatility
drops, and in the lower half once the market has settled down."
Kim Eng's Sullivan, meanwhile, said the severe market reaction
Friday reflected investors' unwillingness to take risks ahead of
the weekend, with some key economic data due later on Friday from
the U.S. and Europe.
The U.S. was slated to release numbers on monthly durable goods
orders later on Friday. Germany was set to issue the result of its
monthly Ifo index on business confidence.
Contributing to the stock market's volatility, the U.S. dollar
(USDJPY) traded in a wide range, plunging as low as Yen101.05 after
rising to Yen102.58 earlier in the day.
Among the major stock movers Friday, shares of Sharp Corp.
(SHCAY) climbed 8.2%, Tokyo Electric Power Co. (TKECY) jumped 9.9%
and Shinsei Bank Ltd. (SKLKF) rose 6.5%.
On the downside, Renesas Electronics Corp. (RNECY) dropped 2.5%,
Sumitomo Mitsui Financial Group Inc. (SMFJY) shed 2.1% and Japan
Real Estate Investment Corp. retreated 4%.
Other markets follow lower
Meanwhile, the S&P/ASX 200 fell 1.6% in Sydney, dropping
further amid worries about Chinese economic growth after
disappointing preliminary results from HSBC's survey on
manufacturing activity in China.
Elsewhere, South Korea's Kospi rose 0.2% and China's Shanghai
Composite finished 0.6% higher, while Taiwan's Taiex edged 0.3%
lower and Hong Kong's Hang Seng Index declined 0.2%.
Financial stocks dropped in Sydney amid worries about the
economic outlook. Commonwealth Bank of Australia (CBAUY) fell 1.4%,
and National Australia Bank Ltd. (NABZY) dropped 1.3%.
In the resource sector, BHP Billiton Ltd. (BHP) came off 1.5%,
and Woodside Petroleum Ltd. (WOPEY) gave up 1.3%.
However, Newcrest Mining Ltd. (NCMGF) rose 3.9% after gold
futures rallied overnight.
Shares of Echo Entertainment Group Ltd. plunged 11.9% after
Crown Ltd. sold a 10% stake in the casino operator.
In Hong Kong, shares of Lenovo Group Ltd. (LNVGY) jumped 3.8%,
on top of the 2.9% advance Thursday in the wake of a 34% jump in
annual profit for the computer maker.
But some property developers and insurers mostly fell to keep
the market under pressure, with China Overseas Land &
Investment Ltd. (CAOVY) losing 1.7%, and China Life Insurance Co.
(LFC) down 1.2%.
Developer Cheung Kong Holdings Ltd. (CHEUY) fell 2.5% as the
stock traded without rights to a dividend.
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