Frail yen boosts Japanese stocks

SYDNEY/TOKYO.
STERLING rose in Asia yesterday as accelerating inflation in Britain cemented expectations of an early interest rate rise, while a weaker yen helped to send Japanese stocks to their highest level since May.
Shares elsewhere in Asia fell slightly and US oil prices recovered to nearly US$85 a barrel partly due to a surprise drop in weekly crude stocks.
Stocks in emerging markets in Asia have underperformed those in developed countries this year.
Underscoring that trend, MSCI’s Japan share index has risen around 7,5 percent this year, compared with a drop of more than 2 percent in MSCI’s Asia Pacific share index excluding Japan.
But some analysts remain sceptical that such a trend will continue for long.
Rodrigo Zorrilla, head of markets Asia-Pacific, Citigroup, said some US$10 billion of funds had moved from emerging market dedicated funds to the United States during the first two weeks of February.
“The question everybody is asking is whether that is the reversal of a trend of the bullish emerging market story or is that just a rebalancing of portfolio,” Zorrilla said, adding that he supported the second view.
“We think the fundamentals are still very strong in Asia. And while there are some scares in the market relating to the political issues in the Middle East and inflation concerns around the world, as soon as the dust settles we will see that trend (of outflows) to slow down and stop.”
Sterling rallied to a 5-1/2 month peak against a currency basket after data on Tuesday showed inflation in Britain jumped to 4 percent, twice the Bank of England’s target, prompting Governor Mervyn King to acknowledge that rates might rise more rapidly than economists had expected. – Reuters.