ASIAN STOCKS SURGE: Brexit pandemonium subsides and Asia 'buys the dip'

Photo: Brendon Thorne / Getty Images.

Whether due to the belief that it will do little to harm the global economy, or perhaps hope that it may result in another wave of fiscal and monetary policy stimulus flooding into global asset markets, the anxiety that gripped markets on Friday over Britain’s decision to leave the EU appeared to have eased in Monday trade.

After a weekend to digest the Brexit result, Asian stock investors reverted to the well-worn path of “buying the dip”, hoovering stocks across most major indices in the region following the carnage on Friday.

The gains were led by the Nikkei 225 in Japan which surged by 2.39%, helping to reclaim around a quarter of the losses seen on Friday.

Like the Nikkei, stocks in China were also bid from the outset, rising steadily as the session progressed. The benchmark Shanghai Composite index finished the session with a gain of 1.45%, partially boosted by comforting words from Chinese premier Li earlier in the day.

One can’t help but think the prospect of further fiscal and monetary stimulus being administered by policymakers also helped to whet the appetite of investors.

Elsewhere stocks posted modest gains in Australia and South Korea while small declines were recorded in Hong Kong, Singapore and Taiwan.

Somewhat remarkably, the gains in stocks came despite the People’s Bank of China fixing the USD/CNY rate at the highest level seen since December 2010 on Monday, something that would have previously rattled financial markets based on the price action seen in the early parts of 2016.

While it initially weighed on risk assets, it was soon ignored as Chinese stocks took flight.

Perhaps explaining the bid in risk assets in the second half of the session, Chinese commodity futures went parabolic with many contracts hitting “limit up” for the session.

There’s clearly an expectation that the UK Brexit vote, and potential negative influence that is may have on the global economy, will see Chinese policymakers boost infrastructure investment even further.

Whether that will eventuate, though, is another question.

While stocks and commodities were bid, rates markets and currencies were a little more circumspect, continuing to demonstrate a degree of caution following significant volatility on Friday.

Here’s the Asian market scoreboard, as at 5.05pm AEST.

Stocks

  • ASX 200 5137.20 , 24.02 , 0.47%
  • Nikkei 225 15309.21 , 357.19 , 2.39%
  • Shanghai Composite 2895.52 , 41.24 , 1.44%
  • Hang Seng 20168.73 , -90.40 , -0.45%
  • KOSPI 1926.85 , 1.61 , 0.08%
  • Straits Times 2733.92 , -1.47 , -0.05%
  • S&P 500 Futures 2016.25 , -2.25 , -0.11%

Forex

  • USD/JPY 102.1 , -0.09 , -0.09%
  • USD/CNY 6.6579 , 0.0223 , 0.34%
  • AUD/USD 0.7431 , -0.0027 , -0.36%
  • NZD/USD 0.7080 , -0.0050 , -0.70%
  • AUD/JPY 75.87 , -0.24 , -0.32%
  • EUR/USD 1.1055 , -0.0060 , -0.54%
  • GBP/USD 1.3460 , -0.0218 , -1.59%
  • USD INDEX 96.044 , 0.5960 , 0.62%

Commodities

  • Gold $1,325.80 , $10.32 , 0.78%
  • Silver $17.73 , $0.04 , 0.20%
  • WTI Futures $47.80 , $0.16 , 0.34%
  • Copper Futures ¥36,580 , ¥380 1.05%
  • Iron Ore Futures ¥411.00 , ¥23.00 , 5.93%

10-Year Bond Yields

  • Australia 2.063%
  • New Zealand 2.375%
  • Japan -0.192%
  • Germany -0.077%
  • UK 1.060%
  • US 1.517%

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