Stock markets in Asia rebounded strongly Wednesday, following solid overnight gains on Wall Street, with Tokyo shares leading the way.
The Nikkei 225 stock index surged 7.7%, or 1,343.43 points, to finish at 18,770.51, as bargain hunters rushed in following that market's more than 15% decline over the prior month.
Hong Kong's Hang Seng index – another market investors pointed to as offering good value – jumped 4.1%.
Elsewhere, South Korea's KOSPI index climbed 2.96%; Shanghai's composite index added 2.29%; Australia's All Ordinaries rose 2.01% and Singapore's Straits Times index rose 1.49%.
In a presentation to investors in Singapore Tuesday, Al Clark, Nikko Asset Management's Sydney-based head of multi-asset investing, singled out Tokyo as a market where a strong case could still be made for buying in the wake of a correction of 10% or more.
In recent years, with quantitative easing still in full swing, investors didn't have to be so discriminating about buying equities when markets sold off, but current conditions demand much higher hurdles be met in terms of valuations before stepping in, said Mr. Clark. After their more than 10% correction in recent weeks, “valuations in Japan actually look attractive,” he said.
Tokyo recent volatility has exceeded that of other developed markets, making a market that was already offering a number of good opportunities “a whole lot more interesting,” noted Dean Cashman, a Singapore-based portfolio manager with Eastspring Investments overseeing a multi-billion-dollar portfolio of Japanese equities.
With no reason to conclude that the recent volatility in global equity markets is set to end, “for relative value guys like us,” willing and able to take a long-term view, there should be continued opportunities to “use volatility in our favor,” rather than chasing it, said Mr. Cashman.