Asian markets bounce back strongly

Asian markets staged a very strong and convincing bounce back today with widespread gains across most sectors. The MSCI Asia Pacific Index climbed 3.8% to 113.18 in late afternoon Tokyo trading, advancing for the first time in four days.

Resources stocks advanced in Australia after suffering large losses yesterday. Commodity prices seem to have bottomed but there is more downside over the next few months, particularly in iron ore, should the global slowdown start to hit manufacturing volumes and demand for steel which is already fragile.

In regional economic news, South Korea’s government announced plans to cut its fiscal deficit next year as the European sovereign debt crisis underscored the need for global policy makers to control their borrowing. According to government estimates, the fiscal deficit will shrink to 14.3 trillion won, or 1% of gross domestic product in 2012, from 25 trillion won, or 2% this year.

This still seems low by global standards and highlights the ability of Asian economies to spend their way through the downturn, if need be, a luxury which U.S. and European governments have already exhausted.

Not all investors were cheerful across the region. The pain of poor investments is coming back to hurt Singapore’s sovereign wealth funds. Government of Singapore Investment Corp. faces a 6.7 billion Swiss franc loss as the biggest investor of UBS AG, topping unprofitable banking investments by the city’s sovereign wealth firms since 2007. The numbers come as Temasek Holdings –Singapore’s other state investment company – divested shares in Bank of America and Barclays at large losses more than two years ago.

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