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ASIA MARKETS: Asian Markets Continue Upswing As Global Rebound Continues

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02/13/2018 | 08:00am CET

By Gregor Stuart Hunter

Nikkei reverses 1.3% gain to finish off 0.6%

The global rebound for stocks continued on Tuesday as Asian markets rose broadly once again, though gains eased as afternoon trading progressed.

The pullback in gains was most pronounced in Japan, where the Nikkei Stock Average went from finishing morning trading up 1.3% to finishing the day down 0.6% as the yen saw an afternoon rally following stable trading throughout the morning.

The dollar fell to Y108.25 from Y108.70 in morning action 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, a 2.4% rebound for Hong Kong's Hang Seng Index eased to 1.6% by midafternoon. The index has dropped nine of the past 11 trading days. Morning gains of more than 2% for Chinese big caps were roughly halved as afternoon trading progressed.

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 (>> Tencent Holdings Ltd) and smartphone-component maker Sunny Optical (>> Sunny Optical Technology (Group) Co. Ltd) .

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.

Stock indexes were up at least 0.5% in much of Asia excluding Japan and a few small Southeast Asian markets, where gains were no more than 0.2%. The Shanghai Composite jumped 1.7%, and the big-cap CSI 300 bounced 2.1%.

Chinese stocks were again strong, though large caps took the baton after gains of some 3% in smaller-cap indexes Monday. The Shanghai Composite jumped 0.9%.

Meanwhile, 10-year Treasury yields 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 Mr. Leow said that is "a key technical resistance level that is unlikely to be breached."

Oil futures gained, in a repeat of Asian trading on Monday. Crude rose 2% before the rebound reversed by the New York settlement, resulting in Brent notching its seventh straight decline. The international oil benchmark was recently up 0.7% at $63 a barrel.

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