Asia: Markets slip but Tokyo extends gains on weak yen

[HONG KONG] Most stock markets turned negative early Tuesday on profit-taking following a week-long rally but Tokyo headed for a sixth-straight gain as a weak yen boosted exporters.

The rally in Japan's export sector was enough to offset a more than 10 per cent plunge in mobile giant Softbank, which was being hammered after agreeing a US$32 billion deal to buy a British chip designer.

Hopes for fresh global central bank stimulus, coupled with forecast-beating readings on US jobs and retail sales, have provided some much-needed optimism after last month's shock vote by Britain to leave the European Union.

The upbeat outlook has also fed a surge on Wall Street that has seen the Dow and S&P 500 rack up multiple record closes. The rally for most markets looks set to come to a halt in Asia as investors cash in, although Chris Weston, chief market strategist at IG in Melbourne, predicted further gains to come.

"On current sentiment, it seems likely that any pullbacks will be shallow and a buying opportunity," he said, according to Bloomberg News. But he added: "We will need to see good earnings, or the market is at risk of rolling over." Hong Kong, which has climbed the previous six days, slipped 0.7 per cent, while Shanghai eased 0.1 per cent. Sydney also dipped 0.1 per cent and Seoul was off 0.4 per cent. Singapore and Taipei were also lower.

However, Tokyo - which was closed Monday for a holiday - added 0.5 per cent by the break as exporters were lifted by the weaker yen.

The Japanese unit has retreated against the dollar in recent weeks on expectations the country will introduce new stimulus and other easing measures, as well as the positive US data that have fanned talk of a possible Federal Reserve interest rate hike.

In the morning the dollar was at 105.87 yen Tuesday, down from 106.14 yen but well up from the levels around 100 yen seen before the jobs report earlier this month.

The exporters' rally was enough to offset the collapse in market heavyweight SoftBank, which closed the morning down 10.7 per cent.

Investors were unimpressed by the deal to buy Britain's ARM Holdings, which makes chips for Apple's iPhone. SoftBank paid a more than 40 per cent premium per share for ARM, which caused renewed worries about its balance sheet following a string of other high-value purchases.

"The price was rather expensive, which led to concerns over interest-bearing debt and possible downgrading of SoftBank's rating," Hiroaki Hiwata, strategist at Toyo Securities, told AFP.

AFP