Asian stocks climbed today, driving the MSCI Asia Pacific Index up the most in almost seven months, on speculation that China’s relaxing of its currency peg to the dollar will boost growth in the world’s third-largest economy.
The MSCI Asia Pacific Index gained 2.7% to 119.35, the biggest advance since 30th November 2010. China’s Shanghai Composite Index gained 2.88% and Hong Kong’s Hang Seng Index climbed 3%. Japan’s Nikkei hit its 1-month closing high, closing higher by 2.43% today, whereas the broader Topix closed 2.02% higher at 902.49. South Korea’s Kospi Index closed higher by 1.62%, and S&P/ASX 200 Index rose 1.6% in Australia.
Yuan Policy
The Chinese central bank, People’s Bank of China, pledged on 19th June'10 to make the yuan (renminbi) more flexible. The yuan has been pegged at about 6.83 yuan per dollar since mid-2008. The yuan today advanced 0.21% to 6.8120 per dollar, its the biggest gain since 30th December 2008.
The global economy is “gradually recovering and the upturn in the Chinese economy has become more solid,” the People’s Bank of China said in a statement announcing its yuan action. A more flexible currency would help to curb consumer-price gains, asset bubbles and dependence on exports for growth.
Gainers
Gauges of raw-material suppliers, energy and industrial companies posted the biggest gains among the MSCI Asia Pacific Index’s 10 industry groups.
Metal shares were among the biggest gainers as China’s policy shift is supposed to be good for commodity prices. BHP Billiton Ltd, the world’s biggest mining company, increased 2.3% as investors bet commodities demand will rise.
Hongkong shares also rose on speculation the yuan’s appreciation will make the city’s real estate cheaper for mainland buyers, with Hang Lung Properties Ltd. climbing 3.9% in Hong Kong
Airlines stocks in China surged, with Air China Ltd., the world’s biggest airline, climbing 5.1% in Shanghai on optimism a stronger Chinese currency will reduce dollar-denominated costs.
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