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Nikkei Markets

Asian stocks gain as Fed officials' comments boost 50 basis-points rate cut chance

Taiwan Semiconductor, MTR among key movers on A300

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan advanced Friday after comments by Federal Reserve officials increased the likelihood of a 50 basis-points rate cut by the U.S. central bank this month.

The Nikkei Asia300 Index of companies rose 0.8% to 1,329.75. Taiwan Semiconductor Manufacturing added 2% after the world's biggest contract chipmaker forecast revenue of between $9.1 billion and $9.2 billion for the July-September period, up 18% at the midpoint from the previous quarter. For the April-June quarter, it reported a 7.6% fall in net profit from a year earlier.

Risk appetite on Friday was buoyed by comments from New York Fed President John Williams and Fed Vice Chairman Richard Clarida that seemed to endorse aggressive policy action to support the U.S. economy. Williams said that it paid to act quickly to lower rates at the first sign of economic distress and Clarida remarked that that policy should be based on outlook and a decisive turn in data was not needed to take steps to stimulate the economy.

The comments by the two Fed officials come ahead of the highly anticipated July 30-31 meeting. While the Fed is widely expected to cut rates at the meeting, the outlook for equities hinges on whether it cut rates by a quarter percentage points or half a percentage points.

There is currently a 55% chance of a 25 basis-points rate cut and a 45% percentage possibility for a 50 basis-points rate cut, according to Fed fund futures. The odds of the latter had climbed as high as 60% following William's comments, but came off amid clarification by the New York Fed that his speech was not about potential policy action at the upcoming Fed meeting. Still the 45% odds are more than double of what they were a week ago.

In other movers on the A300 on Friday, Hong Kong-based railway operator MTR fell 2.7% after saying it will make a provision of HK$2 billion ($256 million) for the six months ended June 30 toward costs related to the construction of a new line.

China Railway Construction advanced 2.7%. The company said second-quarter value of newly signed contracts increased almost 28% on-year.

Ping An Insurance Group climbed 1.4%. Ping An-backed Chinese online wealth management platform Lufax is planning to exit its peer-to-peer lending business, Reuters reported, citing three sources with direct knowledge of the matter.

Siam Commercial Bank closed 1.4% higher after the Thai lender reported a 7% year-on-year rise in net interest income in the June quarter. Bangkok Bank fell 1.3% after net interest income and net profit edged higher from a year earlier.

Keppel Corp. declined 0.3% after the Singaporean conglomerate reported that second-quarter net profit declined 39%.

--Nimesh Vora

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