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[TOKYO] Tokyo's Nikkei 225 rose 0.38 per cent on Wednesday on bargain hunting following two days of heavy selling that saw the benchmark index lose more than three percent.
The Nikkei at the Tokyo Stock Exchange added 64.41 points to finish at 16,819.73, while the Topix index of all first-section shares slipped 0.10 per cent, or 1.36 points, to 1,352.02.
"The Nikkei is rebounding for the first time in three sessions. Bargain hunting is driving up the market, but investors are still wary," Daiwa Securities said in a note.
The Japanese market initially fell in early trade after the yen strengthened, with investors fleeing to safer assets amid Russia's ruble crisis.
The yen is seen as a secure investment target in times of economic uncertainty, but the stronger currency hits Japanese exporters as it makes their products less competitive abroad and erodes the value of repatriated income.
The yen gained ground on both the dollar and the euro on Tuesday, as the Russian central bank's sharp rate hike to beat back capital flight only partly stemmed the ruble's fall.
While investors remained cautious over possible risks, they stayed bullish about Japanese shares going forward, said Makoto Sengoku, strategist at Tokai Tokyo Securities.
"Falls of Tokyo shares had been rather rapid," and encouraged a natural rebound, Sengoku said.
"My view is that the Nikkei could go a step higher toward the year-end," he said.
Investors were also waiting for the outcome of the Federal Reserve's monetary policy meeting to be wrapped up Wednesday. The Fed is expected to adjust its forecasting language to allow a better understanding of its interest-rate hike plans.
"All eyes are now on the US Federal Open Market Committee (FOMC) and (Fed Chair) Janet Yellen's take on the status for an interest rate hike amid all the turmoil caused by falling crude," an equity trading director at a European brokerage told Dow Jones Newswires.
"It's hard to imagine her practising anything but dovish rhetoric at this time, but any nuanced reference to a sooner-than-long-term rise in interest rates may be viewed as a chance to pick up dollars on the cheap, which would be an immediate plus for Japan's oversold equity markets." In forex trading, the dollar bought 117.01 yen, up from 116.59 yen in New York but still down from 117.39 yen in Tokyo earlier Tuesday.
Among major shares, Toyota slipped 0.98 per cent to 7,143 yen, Sony firmed 1.46 percent to 2,365 yen while Japan Tobacco dropped 7.38 per cent to 3,107 yen on fears about the strength of the economy in Russia, which is a major market for the cigarette giant.
On Tuesday, the Dow Jones Industrial Average closed down 0.62 per cent, the S&P 500 lost 0.83 per cent and the Nasdaq sank 1.24 per cent.