Asian share markets were broadly higher Tuesday, tracking overnight gains on Wall Street, as investors globally brushed off Italian voters’ rejection of constitutional changes.
Japan’s Nikkei Stock Average ended up 0.5%, South Korea’s Kospi added 1.3%, Australia’s S&P/ASX 200 rose 0.5%, and Taiwan’s Taiex gained 1%.
The focus is “back to reflation, and it’s back to assessing 2017,” said Chris Weston, chief market strategist at IG. While the issues facing Italy are systemic, they are largely contained for now, he said. On Sunday, Italian voters rejected a government-backed plan to overhaul the legislature to make it easier to pass laws.
Finance stocks in Asia were among the biggest gainers Tuesday, helped by the calm global reaction to Italy’s referendum. In Hong Kong, banking giant HSBC closed up 3.4%, while in Japan, shares of Nomura Holdings gained 3% and Mitsubishi UFJ Financial Group rose 1.1%.
Investors continue to bet on the “reflation trade” on hopes that U.S. President-elect Donald Trump will increase fiscal spending, lower corporate taxes, and boost growth and inflation.
Those expectations were given a boost by encouraging economic data out of the U.S. and China in recent days, as well as a deal last week by key oil-producing nations to cut global crude-oil output, helping lift prices.
Overnight in the U.S., the ISM nonmanufacturing index rose to 57.2 in November from 54.8 in the previous month. The positive data, along with a largely muted reaction to the Italian results, helped drive the Dow Jones Industrial Average to close up 0.2% on Monday, while the tech-heavy Nasdaq added 1%.
In South Korea, titans of industry were grilled by lawmakers in Seoul for donations that the conglomerates made to foundations now embroiled in a scandal that threatens to take down the South Korean president. But South Korean blue-chip stocks continued to rise, buoyed in part by U.S. gains.
Samsung Electronics shares ended up 1.7%, after earlier hitting a new record high. Meanwhile entertainment company CJ E&M Corp. gained 2%. LG Corp. rose 1.1% and Hyundai Motor Co. gained 1.9%. All of those companies’ leaders appeared before lawmakers on Tuesday.
Meanwhile, the Hang Seng Index in Hong Kong ended up 0.8%, in the second day of a new trading link between the city’s exchange and Shenzhen, home to China’s rising tech firms. The agreement also opens the door for Chinese investors to buy into some small-cap stocks.
The Shenzhen Composite Index closed up 0.2%, outperforming the Shanghai Composite Index’s 0.2% decline.
Shares in Australia were driven by gains in resources and financial stocks. BHP Billiton and Rio Tinto rose 1.2% and 0.9%, respectively. Oil prices hit a fresh one-year high overnight but gains in energy stocks were capped as oil prices retreated in Tuesday’s Asian trade. Oil Search added just 0.1%.
Australia’s central bank kept its cash rates target at a record low 1.5% Tuesday. The decision was widely expected by markets.
Traders, meanwhile, are awaiting data on Australia’s economy, due Wednesday. Economists predict a weak economy in the third quarter as mining investment continues to contract and as wages and profit growth remain sluggish.
However, signs of weakness in the economy might prove temporary, given recent stellar gains in prices of commodities such as coal and iron ore, the country’s biggest resource exports, analysts say.
“There’s no need for [Australia’s central bank] to cut rates given…the positives surrounding the commodity sector right now,” said Hue Lu, senior investment specialist at BNP Paribas Investment Partners.