Tokyo Stocks Retreat, As Sydney Hits 17-Month High

Most Asian markets ended higher Thursday, with Australian stocks shrugging off remarks the nation was unlikely to post a budget surplus this fiscal year to end at a 17-month high, while Japanese shares fell on profit-taking after strong recent gains.

The S&P/ASX 200 index  gained 0.4% to 4,634.10 in Sydney, its best closing level in more than 17 months, while China’s Shanghai Composite Index  and Hong Kong’s Hang Seng Index  overcame early losses to finish up 0.3% and 0.2%, respectively.

South Korea’s Kospi  climbed 0.3%, as investors returned from a one-day break for an election that ushered in the country’s first female president, Park Geun-hye.

“The new president appears likely to increase fiscal stimulus, provide more support to small businesses, and alleviate the burden of household debt. In turn, these initiatives would help sustain domestic demand as the external outlook gradually improves in the coming year,” said HSBC economist Ronald Man.

“With fiscal policy set to play a bigger role in supporting growth, there would be less pressure on the Bank of Korea to deliver more rate cuts,” Man said.

Moving in the opposite direction, Taiwan’s Taiex  shed 1.1%.

The broad regional gains came on subdued investor sentiment after an overnight retreat on Wall Street amid doubts that U.S. politicians will reach an agreement to avert the fiscal cliff.

“The lack of traction in concluding any agreement leaves a limited amount of time before year-end, with markets likely to become more nervous by the day. This could still threaten the solid rally in risk assets registered over recent weeks,” said Crédit Agricole strategists.

Japan stocks fall

Also staging a retreat, the Nikkei Stock Average fell 1.2% in Tokyo for its first decline in four sessions. The drop came even as the Bank of Japan announced a further expansion to its asset-purchase program, by another 10 trillion yen ($119 billion).

The decision was “widely expected but does not mark the major shift in policy that the markets had been hoping for,” said Capital Economics’s Japan economist David Rea.

The decline came as the U.S. dollar  strengthened, flirting with the ¥84 mark from ¥84.44 in late North American action Wednesday.

Shares of several yen-sensitive exporters pulled back after strong recent gains, Nikon Corp. losing 2.9%.

Mitsubishi Motors Corp.   fell 5.5% after the auto maker received the Japanese transport ministry’s first-ever public rebuke over product recalls, following its fourth recall over the same problem involving mini-vehicle engine-oil leaks. Nissan Motor Co. tumbled 7.4%.

In Hong Kong trade, Aluminium Corp. of China Ltd.    fell 2.2% after U.S. aluminum rival Alcoa Inc.  saw its debt rating placed on review for downgrade at Moody’s Investors Services on concerns over falling aluminum prices.

Shares of London-headquartered HSBC Holdings PLC  gained 1.4% and Standard Chartered PLC   rose 3.1%, after Credit Suisse upgraded the European banking sector to benchmark from a small underweight, helping to offset losses elsewhere in Hong Kong.

Banks were strong in Seoul trading, helping support the Seoul market, with Hana Financial Group Inc.  rising 1.7%, and Woori Finance Holdings Co.   up 2.1%.

In Sydney, the broad market gains came as investors were unfazed by Treasurer Wayne Swan’s remarks the government was unlikely to meet its target for a budget surplus in the fiscal year ending June 30, 2013.

There was little immediate market reaction to Swan’s comments, as they confirmed “what the market has known for quite some time now,” said Stan Shamu, a market strategist at IG Markets.

Utility-sector companies advanced, with AGL Energy Ltd. up 1.9% and Spark Infrastructure Group ahead by 1.2%.

Marketwatch