Asian Markets Update: Tokyo Stocks Rally Before Rate Hike

TOKYO -- Some say today's rise in Tokyo stocks looked like it was the calm before the storm. Others were quite optimistic, and said the market can finally rally after three dismal months.

The Bank of Japan raised short-term interest rates by 25 basis points, to around 0.28% today, after the market closed. This ends the bank's longstanding zero-interest policy.

The Nikkei 225 index rose 141.85, while the Topix index, which includes all shares listed on the Tokyo Stock Exchange's first section, climbed 0.96 to 1490.89. The Jasdaq small-cap index fell 0.20 to 81.16, while the Nikkei over-the-counter index gained 2.74 to 1665.51.

The BOJ's policy board meeting came at a bad time when many investors and traders are out on their summer holidays and before obon, which starts this weekend. Many Tokyo-ites rush out of the city to go home to spend time with family and pay their respect to the dead.

That said, a rally in Nikkei 225 futures materialized toward the end of the session, putting a positive tone on the cash market that has slipped nearly 15% over the past three months.

"This is the first time in about a month where I've seen investors actually buying new positions in futures," said one trader at an U.S. house here. "Which is surprising since many of us were short just yesterday."

Amid a stoic market atmosphere, tech shares were mixed. TDK (TDK Quote) gained 990 yen, or 7.3%, to 14,650 134.86), while NEC (NIPNY Quote) shed 100, or 3.5%, to 2765. Local reports said NEC was ready to buy Seattle-based SJI, which makes Intranets for corporate clients, for around 6 million to 7 million.

NTT (NTT Quote) lost 30,000, or 2.3%, to 1.26 million despite news that its $5.5 billion acquisition of U.S.-based Verio (VRIO Quote) would finally move forward. The Federal Bureau of Investigation was holding up the buy-out over national security concerns.

The greenback rose against the yen to recently fetch 108.50.

Hong Kong's Hang Seng index shed earlier gains to close down 118.79 at 17,214.42 after retail investors cleared out positions before the weekend. With the market largely void of any direction, traders said some investors bid up bank shares on expectation that the U.S. would not raise rates this later month. HSBC (HBC Quote) rose HK$0.50 to 108.50 ($13.91).

Telecom shares were mostly lower, with China Mobile (CHL Quote) losing 1.00, or 1.6%, to 62.00, while Hutchison Whampoa (HUWHY Quote) shed 0.50 to 115.00.

Elsewhere in Asia, Korea's Kospi index lost 7.07, or 1.0%, to 722.21, while Taiwan's TWSE index shed 50.04 to 7974.65.