Asian shares rose yesterday, with South Korean stocks hitting a six-month high after the country averted recession in the first quarter, as a Wall Street rally boosted risk demand around the region and dented the yen.
Many financial centers in the region were closed for a long weekend, making investors nervous that gains made now may not be sustained next week when many major US companies report quarterly earnings.
The Nikkei hit a three-month closing high for the second day in a row, though off the day’s peak, which reached above the psychologically key 9,000 level, as banks tumbled after Sumitomo Mitsui Financial Group (SMFG) warned of a net loss for the financial year just ended, reviving fears for other megabanks.
The benchmark Nikkei 225 index rose 0.54 percent to 8,964.11, extending Thursday’s 3.7 jump. South Korea’s KOSPI ended up 19.69 points at 1,336.04. Chinese shares closed up 2.70 percent while Taiwan share prices closed up 2.01 percent.
US shares rebounded after Wells Fargo said it expected to post a record quarterly profit of US$3 billion, topping analyst expectations that sent the sector — key to market sentiment — sharply higher, with the S&P financial index soaring 15.51 percent.
“The market was helped by Wells Fargo’s stronger than expected first quarter results estimate, fueling hopes of stabilization in US financial markets,” said Won Jong-hyuck, a market analyst at SK Securities in Seoul.
Global investors have been keenly awaiting US financial results, which move into high gear next week when Goldman Sachs, JP Morgan Chase and Citigroup are all set to report.
“If US banks show some signs of improvements and stabilization, the index could make a more meaningful rebound. Better numbers from banks will point to stronger economies in the second half,” said Lee Sun-yeob, a market analyst at Goodmorning Shinhan Securities.
But there was little joy for financials in Japan a day after its third-largest bank, Sumitomo Mitsui Financial Group (SMFG), said it faces a net loss of US$3.9 billion for the financial year just ended and would raise as much as US$8 billion through the sale of shares.
Shares of SMFG, the smallest of Japan’s three megabanks, faced a glut of sell orders and remained untraded for most of the day. The issue closed down 13.8 percent at ¥3,110 (US$30.96).
Its rivals weren’t doing much better.
Mizuho Financial Group Inc fell 9.6 percent and Mitsubishi UFJ Financial Group Inc retreated 1 percent despite overall market strength.
To bolster its capital base, SMFG filed a shelf registration to issue up to ¥800 billion in new shares.
“SMFG considers it necessary to enhance its capital base both in terms of quantity and quality in order to maintain its competitiveness notwithstanding any future changes that might occur in the global financial sector and to realize sustainable growth,” the company said in a statement.
Credit Suisse responded by downgrading its rating on SMFG stock to “neutral,” noting the high dilution impact of the new share issue and that it “will inevitably prove a negative incentive for the share price.”
Moody’s Investors Service highlighted capital woes at Mizuho Financial Group earlier this week when it cut the bank’s credit ratings.
In an unusual move, Japan’s central bank announced yesterday that it will offer ¥1 trillion in subordinated loans to commercial banks in need of a capital boost.
The Bank of Japan said the emergency measure is aimed at major banks and some regional lenders with overseas operations. The size of the loans and interest rate for the first five years will be set by auction.
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