Japan’s intervention on yen pushed the Nikkei 225 Average to jump 217.25 points or 2.34% to 9,516.56. The intervention impact was limited to Japan, as Hang Seng Index stood at 21,725.64 or up merely 0.14%, while Shanghai Stock Exchange fell instead to 2,652.50 or slipping 36.02 points (-1.34%).
China was said to mull raising capital adequacy ratio for big lenders to as much as 15% by the end of 2012. Tier 1 capital ratio would be of 8%, with the overall CAR at 10%. Yet another buffer would be placed and would be set up to 4% for protection against economic swings, plus another 1% cushion for certain banks. In addition, lenders would be required to have at least 6% of risk-weighted assets. Currently, average CAR among domestic lenders stands at 11% with Tier 1 ratio at 9%. Another 4% additional capital requirement would push banks to raise more funds.
Compared to the new Basel rules, Chinese setting will be tougher should it be enforced. Basel rules implied 4.5% for common equity in five years period, plus 2.5% buffer by the beginning of 2019, with Tier 1 capital requirement at 6%, which include common equity and perpetual preferred stock.
Japan intervened in the currency market to weaken the yen as it hit ¥82.87, sending the currency to over ¥85.00 against the dollar and ¥110.77 against the euro. The intervention was the first in the last six years. Yen’s recent strength has been a big concern for the government as the country relies heavily on exports. The move brought a relief to the Japanese shares especially for exporters. It remains to be seen however, how long the effect will last because the Japanese monetary authorities acted alone in the intervention process. No solo intervention has ever succeeded in the past and this time around it could be of the same story.
In China, Foreign Direct Investment (NYSE:FDI) rose 1.4% from a year ago in August to $7.6 billion. Year-to-date, the FDI grew 18.1% to $65.96 billion, according to the Ministry of Commerce on Wednesday.
JP Morgan Chase lowered some of its ratings on Japanese stocks on Wednesday. Advantest was lowered to UNDERWEIGHT from OVERWEIGHT and Tokyo Electron Ltd. was downgraded as well to NEUTRAL from OVERWEIGHT. Another one, Nikon Corp. had its rating cut to NEUTRAL from OUTPERFORM by Mizuho Securities. The downgrades’ negative effects were offset by the positive impact from the intervention as Advantest advanced 3.09% to ¥1,701, Tokyo Electron rose 3.43% to ¥4,375, and Nikon jumped 4.54% to end at ¥1,473.
Sinopec and Cnooc’s joint deal in OGX Petroleo e Gas Participacoes SA has not been finalized yet, according to the Brazilian company. The company added that several other companies from US, Europe and Australia are also interested to obtain the stake. Sinopec ended at HK$6.43 or down 0.46%.
Foxconn International Holdings was upgraded to EQUAL WEIGHT from UNDERWEIGHT by Morgan Stanley, with target raised to HK$5.70 from HK$4.00, sending the shares to jump 1.6% to HK$5.68.
Cathay Pacific has been downgraded to NEUTRAL from OVERWEIGHT by HSBC. Cathay Pacific was unchanged by the end of the day at HK$20.35.
China Mobile said that Apple’s iPhone and iPad were unable to support its high-speed wireless network, thus preventing the company to sell Apple devices in China. The shares ended at HK$77.75, or down 0.19%.
HSBC ended at HK$81.55, up 0.62% as Morgan Stanley said that its balance sheet, liquidity, funding, and capital position are stronger than the European unit.
Disclosure: No positions