ASIA MARKETS: Nikkei Pares Loss As BOJ Stands Pat On Policy, While Chinese Stocks Steady

By Kenan Machado Features Dow Jones Newswires

Kospi hits record close after blowout earnings from Samsung

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Japanese stocks pared early declines to end flat Tuesday after the Bank of Japan stood pat on its stimulus program.

The Nikkei Stock Average closed the session nearly unchanged at 22,011.61. It had fallen as much as 0.8% earlier in the session due to a markedly stronger yen, but recovered after the BOJ pledged to continue injecting huge amounts of cash into the financial sector (http://www.marketwatch.com/story/bank-of-japan-leaves-monetary-policy-unchanged-2017-10-30).

"While markets are bracing for a new Fed chair and a December U.S. rate hike, the picture on the Japanese side is one of policy continuity," said Cameron Umetsu, chief Japan fixed income strategist at Mizuho International.

The BOJ reiterated its forecast for inflation to reach 2% in fiscal 2019, despite cutting its core inflation estimates for this year and 2018, while slightly raising its growth forecast for this year.

"The bank now sees risks to economic activity as 'generally balanced' rather than to the downside as in previous reports," said Marcel Thieliant, a senior Japan economist at Capital Economics, though he expects growth to slow following the strength in recent months.

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"The upshot is that we don't expect the bank to tighten policy anytime soon," said Thieliant.

Meanwhile, Chinese stocks steadied after falling Monday amid concerns of rising corporate defaults in China as the government reins in lending. The Shanghai Composite Index reversed early losses to edge up 0.1%, with China's bond market stabilizing somewhat after yields on the benchmark Chinese government bond prices reached a three-year high on Monday.

The Shenzhen stock benchmark reversed losses and was up 0.7%.

China's bond-market investors may have panicked at the prospect of a further tightening in monetary policy, said Tommy Xie, an economist at OCBC Bank.

"In fact, the central bank has been injecting funds to nurture liquidity conditions but investors don't seem to buy it," he said.

On Tuesday, the People's Bank of China injected 80 billion yuan ($12.03 billion) into the financial system to boost liquidity, double the amount from Monday, though the levels were still considered modest.

Already, the latest data showed China's clampdown on off-the-books banking and leverage since the beginning of the year was hurting activity, analysts said. An official gauge of China's factory activity edged down in October (http://www.marketwatch.com/story/china-manufacturing-activity-less-than-expected-2017-10-30), indicating softer business activity after hitting a more-than-five-year high in September.

Elsewhere in the region, Hong Kong's Hang Seng Index fell 0.3%, while Australia's S&P/ASX 200 lost 0.2% and Singapore's Straits Times Index slipped 0.1%. Still, most Asian markets ended the month higher.

There were pockets of strength in Asian stocks on Tuesday, with Korea's benchmark Kospi rising 0.9% to a fresh record close, buoyed by gains in heavyweight Samsung Electronics (005930.SE) after the company reported another set of record quarterly results (http://www.marketwatch.com/story/samsung-once-again-notches-record-profit-2017-10-30). Samsung's stock rose 1.9%.

Read:Samsung makes sweeping changes to leadership (http://www.marketwatch.com/story/samsung-makes-sweeping-changes-to-leadership-2017-10-31)

New Zealand's stock index also edged higher to a fresh record on Tuesday, ending October with a 10th straight month of gains, matching a previous record-run seen in 2012.

Check out:New Zealand to ban most foreign investors from buying houses (https://www.wsj.com/articles/new-zealand-to-ban-most-foreign-investors-from-buying-houses-1509424736?mod=mktw)

-- Liyan Qi and Eun-Young Jeong contributed to this article.

(END) Dow Jones Newswires

October 31, 2017 07:04 ET (11:04 GMT)