Asia report: Nikkei jumps after BoJ hold, South Korean stocks soar

(Sharecast News) - Asian stocks advanced on Friday, with strong gains in Tokyo and Seoul in particular, after a monetary policy meeting by the Bank of Japan and a massive rally in South Korean chip stocks.

The Nikkei 225 finished 4.0% higher after the Japanese central bank left its benchmark interest rate unchanged, keeping borrowing costs at 1% after last month's hike, amid heightened speculation the government intervened to support the yen.

Board member Hajime Takata dissented, arguing for a further rate rise to address potential upward price pressures. The move came after the yen abruptly strengthened on Thursday night, appreciating rapidly against the dollar - a shift analysts said strongly suggested action by Japanese financial authorities.

"USD/JPY was hammered lower from 163 to 159 on Thursday following FX intervention, with [Federal Reserve chair] Warsh's hold and relatively dovish press conference arguably providing the window the Japanese Ministry of Finance had been waiting for. The dollar had already begun to soften on its own, making intervention easier to execute," said analysts at Rabobank in a note.

"Initial speculation was that the move would be followed by a Bank of Japan rate hike, but that failed to materialise this morning."

Gains were more muted elsewhere, with the Hang Seng index edging 0.1% higher, the Shanghai Composite rising 0.7%, the Sensex up 0.2% and the STI in Singapore down 0.6%.

However, it was South Korea's Kospi index which grabbed headlines on Friday, soaring nearly 18% on the day as investors went bargain-hunting following a three-day sell-off.

Chip stocks such as SK Hynix and Samsung Electronics soared, helped in part by improving sentiment around spending plans by US tech groups Amazon and Microsoft following their recent earnings.

Patrick Munnelly, partner of market strategy at Tickmill Group, said the rally helped the stocks to recover from recent "brutal losses as investors reassessed whether the forced deleveraging had gone too far".

He added: "The bounce is impressive, but the context matters: the KOSPI is still on track to finish July down almost 25%, which would be its worst monthly decline since the 1997 Asian financial crisis. That makes today's rally feel less like a full restoration of confidence and more like an aggressive short-covering episode in a market that had become deeply oversold."