Nikkei Gains on Japan Election Result

Asian stock markets were mixed on Monday, with a stronger yen hurting the Nikkei after Japan's weekend election result, while banks underperformed in China on concerns over their interest rate margins after the central bank removed a floor on lending rates.

Japan's ruling Liberal Democratic Party secured a majority in the upper house of parliament in an election on Sunday, putting both houses under the control of the government, and providing stability to Japanese politics for the first time in many years. The ruling party is now in a stronger position to push through economic reforms, including a package of growth strategies unveiled last month.

The Nikkei Stock Average initially welcomed the result, starting the session higher, but eventually moved into negative territory as the yen strengthened. The index was down 0.3%, giving up its 1.2% rise in early trading.

Japanese stocks were hindered by a strengthening yen, which started to push higher against the greenback just after stocks started trading - suggesting that some currency traders were disappointed by the Nikkei's weaker than expected gains in Tokyo.

The dollar traded at ?99.91, compared to ?100.65 late Friday in New York.

Making moves in Tokyo was Sharp Corp., which fell 4.5% after a Nikkei report said that the company is considering a capital increase through a private placement of shares and a public offering that could raise more than ?100 billion.

Another individual mover was Tokyo Electron, which lost 2.6% after a Nikkei report said that the manufacturer of semiconductor production equipment is expected to make a consolidated operating loss of around Y9 billion for the quarter ending June, reversing a profit made in the 2012 fiscal year, citing poor sales of equipment for manufacturing chips and solar panels.

The other main development that markets were eyeing was the latest stage in China's liberalization of interest rates, after the People's Bank of China removed the government mandated floor on lending rates. Local banks will therefore be able to price loans at whatever level they choose.

The move comes just one month after Chinese banks were rocked by a severe liquidity squeeze that resulted in sharp losses for stocks in Shanghai.

Chinese markets were weighed by declines in Chinese banks: the Hang Seng Index down 0.2% in Hong Kong and the Shanghai Composite Index was lost 0.6% in the mainland.

Industrial and Commercial Bank of China fell 0.8% in Shanghai, and lost 1.2% in Hong Kong. China Construction Bank fell 1.4% in the mainland, and declined 0.4% in Hong Kong.

Elsewhere in the region, Australia's S&P/ASX 200 was up 0.5%, South Korea's Kospi Composite rose 0.5% and Singapore's Straits Times Index gained 0.5%.

Write to Daniel Inman at daniel.inman@wsj.com

Source: http://online.wsj.com/article/SB10001424127887323829104578620623817628366.html?mod=rss_world_markets

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