Most Asian Stocks Rise as Japan Shares Climb on Yellen Comments

(Bloomberg) -- Most Asian stocks rose, led by Japan, as the yen weakened amid growing confidence that the U.S. economy is strengthening enough to handle higher borrowing costs as early as this summer.

The MSCI Asia Pacific Index, which is denominated in dollars, fell less than 0.1 percent to 128.10 as of 5:06 p.m. in Tokyo, with 677 shares advancing while 268 declined. Japan’s Topix index rose 1.2 percent as exporters advanced and an aide to Prime Minister Shinzo Abe said he will probably delay a sales tax increase for two years. Taiwan’s Taiex Index climbed 0.9 percent as Hon Hai Precision Industry Co. and Taiwan Semiconductor Manufacturing Co. pushed technology companies higher.

Federal Reserve Chair Janet Yellen said in remarks at Harvard University on Friday that an improving American economy would probably warrant another rate increase “in the coming months,” sending the dollar higher against the yen. The yen traded at 111.30 per dollar, the weakest since April 28. Financial markets in the U.S. and U.K. will be closed on Monday for a public holiday.

“The message from the Fed remains that a rate hike is getting closer,” said Shane Oliver, head of investment strategy at Sydney-based AMP Capital Investors Ltd., which oversees about $120 billion. “Caution and delays from the Fed have provided confidence that it is not going to be reckless.”

The Asia Pacific gauge is down 2.4 percent this month, the worst showing since an 8 percent plunge in January, as investors’ anxiety over the U.S. central bank’s plan to raise interest rates offset increasing signs of strength in the world’s biggest economy. Investors have been whipsawed this year, with the regional gauge slumping 14 percent through a February low on concern a devaluation of the Chinese yuan would curb global growth and amid prospects for higher U.S. borrowing costs. It then rallied almost 20 percent through this year’s peak in April before retreating again.

Australia’s S&P/ASX 200 Index climbed less than 0.1 percent. New Zealand’s S&P/NZX 50 Index rose 0.4 percent, while South Korea’s Kospi index dropped 0.1 percent. India’s S&P BSE Sensex Index and the Nifty 50 Index both gained 0.3 percent, with volume on the Nifty about 38 percent higher than the 30-day average.

Traders are pricing in a 30 percent chance the Fed will increase rates in June, up from 4 percent earlier this month. July shows a 54 percent probability of higher U.S. borrowing costs, up from 51 percent earlier Friday.

Abe will probably delay a sales tax increase for two years, according to an aide. He is pushing his stimulus agenda even after fellow G-7 leaders failed to join him in warning of a global economic crisis. Japanese consumers may enjoy a lower levy until late 2019, Hakubun Shimomura told Fuji TV, adding the country has no other option. Abe will also propose a fiscal spending package of as much as 10 trillion yen ($90.6 billion), the Nikkei reported.

The Shanghai Composite was little changed. Hong Kong’s Hang Seng Index added 0.3 percent, while the Hang Seng China Enterprises Index of mainland firms listed in the city climbed 0.3 percent. Industrial and automobile companies led gains as cheaper valuations relative to their mainland peers lured buyers. At just under seven times its projected 12-month earnings, the Hang Seng China index is valued at a 43 percent discount to the Shanghai gauge.

New rules published by Chinese stock exchanges are aimed at curbing arbitrary suspensions in Chinese stocks, and halts will be capped at three months for major asset restructuring and one month during private placements, the exchanges said in separate statements. The bourses had allowed trading suspensions to shut down half the stock market as officials struggled to stop a $5 trillion selloff last summer.

Commodity shares had the worst performance on the MSCI Asia Pacific gauge on Monday. A stronger dollar weighs on commodity prices, which are denominated in the U.S. currency and become more expensive for buyers outside the U.S. when the dollar climbs. BHP Billiton Ltd. sank 0.7 percent in Sydney and Newcrest Mining Ltd., a gold producer, lost 1.5 percent.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net. To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net.

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