Asian stock markets rallied Tuesday as banks and commodity-linked stocks climbed on positive cues from U.S. equities, although Japanese shares gave back a bulk of their early gains after the nation's central bank choose not to further loosen its monetary policy. Australia's S&P/ASX 200 index rose 1.2%, South Korea's Kospi advanced 1.1%, Hong Kong's Hang Seng Index climbed 1%, Taiwan's Taiex added 1.3% and China's Shanghai Composite Index edged up 0.9%. The Nikkei Stock Average rose 0.1% in Tokyo, well off the day's peak above the 10,000-point level. Gains narrowed after the Bank of Japan left its policy rate unchanged and didn't announce a further expansion to its asset-purchase program, although the central bank expanded a low-cost loan program to help stimulate the economy. "Regardless of the BOJ's decision [on] the lending scheme, the market is focused on how much and when the BOJ will expand the asset-purchase program," said Junko Nishioka, chief economist at the Royal Bank of Scotland, noting that the central bank's unexpected decision to expand purchases of Japanese government bonds at the February meeting had helped to lower yields and weaken the yen. Japanese stocks have jumped since the February meeting, reported by Wall Street Journal. Several exporters pared gains or ended lower, with Canon dropping 0.7% and Sony losing 0.8%. Naomi Fink, an equity strategist at Jefferies Japan, said strength for the Japanese stock market—one of the region's best performers this year with gains of 17%—has in part been driven by its "extreme undervaluation." "One of the main catalysts is overseas demand recovering. A weaker yen right now is also helpful for assets," Ms. Fink said. Among those that retained their gains, heavyweight Fast Retailing climbed 1.1%, while Fanuc added 0.8%. Shares in Asahi Kasei tumbled 5.4% on plans to buy U.S. medical equipment maker Zoll Medical for $2.2 billion. The broad strength in Asia came after U.S. stocks extended gains into a fourth session ahead of an interest-rate decision from the U.S. Federal Reserve. Dow Jones Industrial Average futures were up 46 points at 12,943, indicating a likely positive opening Tuesday. While markets were looking forward to the Federal Open Market Committee's policy decision, some analysts pointed out that the recent recovery in U.S. economic indicators may yield mixed results. "The recovery in the U.S. labor market may prove to be a mixed blessing for the prices of risk assets," Julian Jessop at Capital Economics said. "Equity and commodity markets cannot expect both strong growth in the U.S. and further quantitative easing from the Fed, leaving them vulnerable to disappointment on one count or the other." Financials were among the region's gainers. HSBC Holdings climbed 1.4% in Hong Kong, Mitsubishi UFJ Financial Group rose 0.7% in Tokyo, Australia & New Zealand Banking Group edged 1.7% higher in Sydney and Hana Financial Group jumped 3.4% in Seoul. Steelmakers were notable advancers across Asia. Tokyo-listed JFE Holdings gained 0.8%, Posco added 0.4% in Seoul and Bluescope Steel climbed 1.3% in Sydney. In Sydney, major miners headed higher, with BHP Billiton climbing 1.3% and Rio Tinto rising 1%. Airlines were also gaining ground in Sydney, with Qantas Airways and Virgin Australia Holdings trading up 4.5% and 3.4%, respectively, after both firms were upgraded to outperform by Macquarie.
