Why Asian Stocks Continue Advancing for a Third Day

What?

Investors the world over are rushing to get a piece of Asian stocks as they continue to head for the skies for a third consecutive day. In early trade this morning, consumer and industrial shares climbed in Asia as Japanese stocks rallied after a holiday.

The MXAP – Asian Pacific Index climbed 0.1 percent to 140.62 in early morning trade. There has also been a 0.7 percent rise in the Japan’s Topic (TPX) index.

Why?

Monetary policy easing in China and Europe have been the main driving force behind the market rise. It is evident that investors have been helped by government policy. The People’s Bank of China from Nov. 22 lowered the one-year lending rate by 40 basis points to 5.6 percent and the one-year saving rate 25 basis points to 2.75 percent, and increased the ceiling for deposit rates. The one-year lending rate will be 5.35 percent in the second quarter of 2015 and the one-year deposit rate will be 2.5 percent, according to the median forecast of economists surveyed by Bloomberg.

So what?

Investors in South Africa continue to benefit from this positive global sentiments as the JSE closed high last week Friday after a four day decline. However, domestic factors and constrained growth within the economy should continue to guide investors to systematically pick stocks with long term earning potentials in growth industries and not just stocks whose performance are driven by short term global sentiments. Investors also have to continue to watch what policy direction the South African government will take as we approach 2015.

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