Asia market reaction as Japan contracts

Official data released on Monday showed that Japan's economy contracted in the three months to December 2015. On an annualized basis, the economy contracted 1.4 percent during the period.

The reduction of 0.4 percent during the quarter was slightly worse than the 0.3 percent contraction anticipated by market watchers. It was due mainly to weaker domestic demand and slower investment in housing.

"Japan's economy shrank last quarter for the second time over the past year," said Marcel Thieliant from research house Capital Economics. He added: "the bigger picture is that spare capacity is not shrinking fast enough to reach the Bank of Japan's two percent inflation target on a sustainable basis."

It is the latest in a series of setbacks for Prime Minister Shinzo Abe's plan to revive the economy - dubbed Abenomics.

Introduced after his election victory in December 2013, the economic reform program aimed to end the deflation which has blighted Japan for nearly twenty years and to boost demand and investment.

Markets in Tokyo shrugged off the news and rose 7.16 percent on Monday. The benchmark Nikkei 225 index at the Tokyo Stock Exchange surged by more than 1,000 points, recovering a good deal of the 11 percent losses sustained last week.

Shanghai market reopens

Chinese stock markets reopened on Monday after the week-long Lunar New Year holidays which had seen currency fluctuations around the US dollar and falls in international markets.

The People's Bank of China (PBOC) fixed its yuan at the highest rate in over a month as it continued efforts to stem speculation of an imminent devaluation.

In an interview over the weekend, China's central bank governor Zhou Xiaochuan said there was no basis for the yuan to keep falling, and China would keep it stable versus a basket of currencies while allowing greater volatility against the US dollar. "China has the world's largest foreign exchange reserves," he said. "We will not let speculative forces guide market sentiment."

Shanghai stocks slumped 2.84 percent at the open on Monday. The benchmark Shanghai Composite Index slid 78.53 points to 2,684.96. The Shenzhen Composite Index, which tracks stocks on China's second exchange, slumped 3.25 percent, or 56.89 points, to 1,693.81.

The Shanghai Composite has dropped 22 percent in 2016 but it is still up 31 percent over the past two years

HSBC bank to stay in London

International bank HSBC decided to keep its headquarters in Britain following a review into a potential move that could have shifted the group's base to Hong Kong.

"London is one of the world's leading international financial centres and home to a large pool of highly skilled, international talent," Europe's biggest bank said in a statement following a meeting in the British capital on Sunday. "It remains therefore ideally positioned to be the home base for a global financial institution such as HSBC".

HSBC is named after its founding member, The Hongkong and Shanghai Banking Corporation Limited, which was established in 1865 to finance the growing trade between Europe, India and China. It moved from Hong Kong to London in 1993 when it bought Britain's Midland Bank. Management considered several possible alternatives for its HQ, including Toronto and Paris.

jm/nm (Reuters, AFP)