Asian stocks rebound despite Cyprus woes; Nikkei up 2.02%

FTS-Forex – A day after punishing riskier assets on speculation Cyprus is heading towards bankruptcy and possible expulsion from the euro zone, traders bid up Asian stocks on Tuesday, indicating that contagion fears are low regarding the tiny island nation. 

In Asian trading Tuesday, Japan’s Nikkei 225 rose 2.02%, resuming a bull run that has made the Japanese benchmark index one of the best-performing developed world indices this year. Japanese stocks got some tailwinds as USD/JPY snapped back to the upside after two-days of losses. 

Last week, the European Union and the International Monetary Fund approved a plan to force Cyprus to tax all bank deposits of less than EUR100,000 at a rate of 6.75% and deposits above EUR100,000 at a rate of 9.9%. 

EU officials have since backed away from the plan to tax small Cypriot depositors, but one official said the EUR5.8 billion target could be reached by taxing deposits north of EUR100,000 at a rate of 15.6%. 

Cyprus, which is home to just 1 million people, balked at the deposit levy plan and on Sunday delayed a vote on the measure, sending chills down the spines of investors the world over. Cyprus is already on the brink of being the fifth euro zone nation to require a financial bailout since 2009. 

Hong Kong’s Hang Seng rose 0.52% while the Shanghai Composite added 0.11%. While the Shanghai Composite is trading higher, the gains are tepid compared to the rest of the region. Chinese stocks have weakened considerably this year and some U.S.-listed exchange traded funds tracking the country have already entered corrections, having fallen 10% or more from their most recent highs. 

Australia’s S&P/ASX 200 advanced 0.40% Reserve Bank of Australia deputy governor Dr. Philip Lowe said the strong Aussie has been good for the nation’s economy. 

Lowe also said RBA’s spate of interest rate cuts are starting to have a positive impact on the economy. From late 2011 through the end of last year, the central bank slashed Australia’s overnight cash rate to 3%, still one of the highest in the developed world. 

New Zealand’s NZSE rose 0.13%. South Korea’s Kospi surged 0.93% despite the weaker yen and a stronger won. The South Korean currency ended an eight-day losing skid against the U.S. dollar today. 

Singapore’s Straits Times Index added 0.70% while S&P 500 futures are higher by 0.12%.

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