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Asian equities ended the third quarter on a positive note. The Nikkei 225 of Japan led the main indices in the region with a gain of 1.4%. The Shanghai Composite Index rose 1.1% and the Hong Kong Composite Index gained 0.3%.
The Japanese benchmark has reached record highs for nearly 27 years, thanks to improved corporate earnings, a healthier economy and a weaker yen.
The Nikkei 225 reached 24,286.10, the highest intraday level since November 1991 – as the epic boom of the 1980s in Japan deteriorated and gave way to decades of economic stagnation and stable prices. It closed up 1.4% to 241.20.04, a new high of eight months. The index has more than doubled since Shinzo Abe became prime minister in late 2012, pushing a program of business review, economic revitalization and extremely easy monetary policy.
The latest gains came as the Japanese yen fell to its lowest level since December, at $ 113.67 a dollar, after the Federal Reserve raised interest rates and signaled further increases. The weak yen makes Japanese exports more competitive.
Friday's rally confirmed the Nikkei 225 as the best-performing regional index of the quarter; it gained 6.7% in local currency. This far exceeds the increase of just over 2% for the second Indian Sensex – although no benchmark has been as positive in terms of dollars. In contrast, Chinese equities have been the subject of lingering concerns over trade and the slowdown in the economy.
Market reaction
The recent increase in Nikkei has been favored by companies targeting a growing middle class in China and Asia. Giant makeup
Shiseido
Co.
rose 62% in 2018 and manufacturer of musical instruments
Yamaha
Corp.
grew by 45%.
Chinese consumers tended to become regular customers once they discovered the quality of Japanese products, said Soichiro Monji, senior economist at Daiwa SB Investments. While some industries, such as cars, could still be the target of trade disputes with the United States, sectors such as cosmetics and food are less likely to be affected, he added.
The valuations remain attractive, with the index being estimated at only 13 times earnings per term, said Tony Glover, senior investment specialist at BNP Paribas Asset Management in Tokyo. "It's a good time to enter the Japanese market," he said, with earnings likely to remain strong for the rest of the year.
Seth Merrin, managing director of liquidnet trading platform operator, said that given the political uncertainty elsewhere, international investors place a high value on continuity in Japan. "Abe is a symbol of stability," he said. The rapid turnover of prime ministers before taking office has left global investors to neglect Japan as an investment opportunity, he added.
Somewhere else
China turned its currency down for a fourth session, setting the yuan at 6.8792 to the dollar, its lowest level since mid-August.
China Renaissance Holdings
Ltd.
, a technology-driven investment bank, fell 8.9 percent to 22.50 Hong Kong dollars, after falling more than 22 percent in Hong Kong on Thursday.
Write to Joanne Chiu at [email protected] and Kosaku Narioka at [email protected]
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