Asian Stocks Rally for Sixth Day After Fed Holds Interest Rates

(Bloomberg) -- Asian stocks outside Japan rose for a sixth day after the Federal Reserve refrained from raising U.S. interest rates and scaled back expectations for increases in 2017, buoying demand for riskier assets.

The MSCI Asia Pacific Excluding Japan Index climbed 1 percent to 454.65 as of 4:01 p.m. in Hong Kong, heading for the highest close since Sept. 9. Fed officials said the case for higher interest rates has strengthened, but they had decided “to wait for further evidence of continued progress” toward the central bank’s objectives. Japanese markets are closed Thursday for a holiday after equities rose to a three-month high on Wednesday as the Bank of Japan adjusted its monetary policy.

“We’ve seen a gradual decline in where they see the Fed funds rate over the long term,” Frances Donald, senior economist at Manulife Asset Management Ltd., which oversees about $334 billion, told Bloomberg Radio from Toronto. “In Japan, markets are somewhat relieved” by the BOJ’s tweaks, he said.

Traders have been losing faith in the Fed’s ability to diverge from the looser monetary policy stance of central banks in Europe and Japan amid evidence of inconsistent strength in the world’s largest economy. While the U.S. authority is predicting a rate increase by year-end, officials said they now expect two increases next year, down from the three projected in June.

Australia’s S&P/ASX 200 Index advanced 0.7 percent. New central bank Governor Philip Lowe told a parliamentary panel in Sydney that his colleagues have not been overly fixated on keeping inflation in a narrow range.

Record-low Rates

New Zealand’s S&P/NZX 50 Index closed up 0.4 percent. The nation’s central bank kept interest rates unchanged Thursday, but said it expects to cut them again to return inflation to target. While record-low borrowing costs are fueling a housing boom and boosting economic growth, they haven’t managed to revive inflation, which is being held below the bottom of a 1 percent to 3 percent target band by a strong New Zealand dollar.

The Jakarta Composite Index climbed 0.6 percent, heading for its highest close in two weeks, after Bank Indonesia reduced its benchmark interest rate by 25 basis points to 5 percent. The Philippine Stock Exchange Index added 1.1 percent after the nation’s monetary authority left borrowing costs unchanged.

Hong Kong Rally

Hong Kong’s Hang Seng Index finished 0.4 percent higher, paring an earlier gain of as much as 1.6 percent that took the benchmark index briefly above 24,000. The gauge has surged 14 percent this quarter, poised for its biggest advance since 2009, on bets global central banks will remain accommodative and as higher yields and lower valuations drew mainland investors to the city’s equities. The Shanghai Composite Index rose 0.5 percent.

South Korea’s Kospi index closed up 0.7 percent to cap a 2.5 percent weekly gain, the most since July. Taiwan’s Taiex index added 0.1 percent, while Singapore’s Straits Times Index slipped 0.1 percent. India’s S&P BSE Sensex measure was up 0.8 percent.

China Shenhua Energy Co. advanced 4.6 percent in Hong Kong as the nation’s largest coal producer said it plans to boost output. Newcrest Mining Ltd., Australia’s biggest gold miner, gained 6.9 percent in Sydney as the bullion traded near a two-week high. Eclat Textile Co. jumped 5.9 percent in Taipei on expectation sales will improve ahead of the U.S. holiday season.

Futures on the S&P 500 Index were little changed. The U.S. equity benchmark index climbed 1.1 percent on Wednesday to the highest close since Sept. 8. The measure extended gains after Chair Janet Yellen said asset valuations are “not out of line with historical norms.”

--With assistance from Zhang Shidong To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net, Adam Haigh in Sydney at ahaigh1@bloomberg.net. To contact the editors responsible for this story: Jeff Sutherland at jsutherlan13@bloomberg.net, Andrew Janes, Chan Tien Hin