The global rebound for stocks continued on Tuesday as Asian markets rose broadly once again, though gains eased as afternoon trading progressed.
In Asia, Japan’s Nikkei Stock Average NIK, -0.65% fell 0.7% while Hong Kong’s Hang Seng Index HSI, +1.29% rose to 1.3% after dropping nine of the past 11 trading days. The Shanghai Composite Index SHCOMP, +0.98% rose 1% ahead of the Lunar New Year holiday.
Japanese stocks dropped as the yen USDJPY, -1.01% saw an afternoon rally as some wondered whether changes looming on the Bank of Japan board outside the expected reappointment of Haruhiko Kuroda could lead to tighter policy. Analysts at Bank of Tokyo-Mitsubishi UFJ said it is possible that more-hawkish policy makers could be appointed as deputy central bank governors.
Meanwhile, Ashvin Murthy, who manages the Singapore-based AVM Global Opportunity hedge fund, said the BoJ could focus its efforts to stabilize bond yields on 5-year government bonds instead of 10-years. That would result in a so-called stealth taper that could allow the central bank to lift longer-term borrowing rates without reducing the size of its quantitative easing program.
Elsewhere, Hong Kong’s Hang Seng Index HSI, +1.29% pared its gain to 1.3%.
Despite the pullback as Tuesday’s trading progresses, bargain-hunting has been going on in Hong Kong, said Jim Fong, portfolio manager at Oceanwide Asset Management Ltd.
After last week’s global rout, “it’s a golden opportunity to accumulate some good, quality stocks.” He said Oceanwide has increased positions in tech stocks including Tencent 0700, +3.13% and smartphone-component maker Sunny Optical 2382, +5.68% .
The pullback in China and Hong Kong came ahead of the Lunar New Year holiday. The Stock Connect trading link between Hong Kong and China is closed from Tuesday until next week.
Mainland investors, which had been supporting the Hong Kong market with inflows of capital, withdrew some funds during the past two weeks. They won’t be able to trade stocks in the city until Feb. 22.
Chinese stocks were again strong, though large caps took the baton after gains of some 3% in smaller-cap indexes Monday. The Shanghai Composite SHCOMP, +0.98% jumped 1%.
Meanwhile, 10-year Treasury yields TMUBMUSD10Y, -1.05% continue to hold at around 2.85% after hitting another four-year high Monday of 2.902%. That despite the Treasury Department saying U.S. federal spending outstripped tax revenue in January.
The jump in bond yields to start 2018 was one reason behind the recent global stock selloff, and analysts say rates could rise more as central banks normalize policy and the global
If the 10-year reaches 3%, it could trigger further market volatility, said Eugene Leow, a rates strategist at DBS. The bond’s yield bottomed out at 1.32% in July 2016. The 3% level was last reached in late 2013, “towards the end of the taper tantrum,” he said. But Leow said that is “a key technical resistance level that is unlikely to be breached.”