Asia stocks boast biggest rise in 15 months

Dec 18, 2014, 11:56 PM EST
mployees work behind a monitor displaying the exchange rate of the yen against the U.S. dollar, top, and the Nikkei 225 Stock Average figure at a foreign exchange brokerage in Tokyo, Japan.

Asian shares enjoyed their best day in 15 months on Friday, after Wall Street boasted its biggest two-day advance since late 2011 amid relief the Federal Reserve was in no rush to withdraw stimulus from the U.S. economy. Reuters writes:

The gains came even as oil stayed under pressure, suggesting equity investors were beginning to see the positives in lower fuel costs and increased consumer spending power.

Japan's Nikkei JNIc1 climbed 2.1 percent to erase most of it's recent losses, while Australia's main index romped ahead by 2.2 percent.

MSCI's broadest index of Asia-Pacific shares outside Japan put on 1.5 percent, the steepest daily rise since September last year.

Shares in Shanghai hit their highest in four years before running into profit taking. "Risk sentiment is ending the week on a stronger footing after a poor start," said analysts at Barclays.

"Market expectations for ECB QE add to the Fed's upbeat message on U.S. growth and stabilization in Russia."

Policy makers in Asia are confronting Russia’s debacle from a stronger position than when emerging markets were roiled around the globe in 1997-98. Bloomberg News reports:

With shrinking current-account deficits, cheaper oil and higher reserves in their favor, the biggest Southeast and South Asian economies may see a situation more akin to 2002, when disasters in Argentina and Turkey failed to trigger crises in the region.

While markets haven’t been unaffected -- Indonesia and India bought their currencies this week after they slid -- policy shifts and domestic demand may help. With swelling middle classes clamoring for better homes, transport and entertainment, companies in the region have homegrown sources of growth, and deeper local capital markets to turn to for financing.

“Good policies are being made quickly across Asia,” said Glenn Maguire, Singapore-based Asia Pacific chief economist at Australia & New Zealand Banking Group Ltd. “A number of economies have reduced budget subsidies and the decline in oil prices is an incredibly powerful tonic for the region’s economies.”

Nations including Thailand, Malaysia and Indonesia have embarked on a period of structural reforms since the Asian financial crisis, taking steps to reduce government spending and deficits, accumulating reserves, raising interest rates and improving governance.

That’s helped the region withstand the fallout from Turkey’s crisis in 2001 and Argentina’s default, then the world’s largest, in 2002.