ASIA MARKETS: Nikkei Pares Losses As BOJ Keeps Policy Steady, But Other Asian Markets Under Pressure

By Kenan MachadoFeaturesDow Jones Newswires

Kospi hits fresh record close after blowout earnings from Samsung

Japanese equities pared losses in late Tuesday trading, after the nation's central bank said it would maintain its easy-money measures to spur inflation, though key markets in the region remained under pressure.

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The Nikkei Stock Average closed the session nearly unchanged, after falling as much as 0.8% earlier in the session due to a markedly stronger yen. Losses narrowed following the Bank of Japan's monetary decision, which kept interest rates unchanged as it plans to continue injecting huge amounts of cash into the financial sector.

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.

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

Meanwhile, Chinese stocks stayed weak amid lingering concerns of rising corporate defaults in China as the government reins in lending, though losses narrowed in late trading.

The Shanghai Composite Index was last just slightly lower, paring early declines, with China's bond market stabilizing somewhat after yields on the benchmark Chinese government bond prices surged to a three-year high on Monday. The Shenzhen stock benchmark reversed losses and was up 0.3%.

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 (, indicating softer business activity after hitting a more-than-five-year high in September.

Elsewhere in the region, Hong Kong's Hang Seng Index was down 0.2%, while Australia's S&P/ASX 200 was also off 0.2% and Singapore's Straits Times Index was down 0.1%. Still, most Asian markets were poised to end the month higher.

Nonetheless, there were pockets of strength in Asian stocks, with Korea's benchmark Kospi rising 1% to a fresh record close, buoyed by gains in heavyweight Samsung Electronics after the company reported another set of record quarterly results. Samsung's stock was up 2.3%.

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.

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

(END) Dow Jones Newswires

October 31, 2017 02:40 ET (06:40 GMT)