A surprise move by the Bank of Japan (BoJ) has boosted the search for riskier assets, according to Colonial First State Global Asset Management's monthly market analysis.

The company’s April 2013 Market Watch found that higher yielding assets and equities in particular were strong performers for the month.

More specifically, Europeans were very bullish, with a host of equity markets making significant gains. Across the Atlantic, the S&P500 Index, Dow and NASDAQ all added around 2 per cent, while domestically, the S&P/ASX 200 Accumulation Index gained 4.5 per cent.

All this has to be seen in the context of the bond purchase by BoJ.

“All of a sudden we had this massive announcement from the Bank of Japan that really led the market to believe that this liquidity push from central banks would continue for a longer period of time,” Belinda Allen, a senior analyst at Investment Markets Research at Colonial First State told InvestorWeekly.

“That certainly boosted risk assets, so it was a game changer because up until now Japan had been one of the least active central banks.”

Prior markets had largely factored in the global stimulus from continuing QE; however, the size and duration of the bonds purchased by BoJ shocked analysts and investors.

“The market thought that they would do QE, but not to the same extent in terms of volume, but also in terms of what assets they would be buying. In particular, what was the surprise was the duration of assets that they would buy,” Ms Allen said.

The decision had a strong affect domestically and helped to push international bonds lower.

“In Japan, we saw very volatile moves in Japanese government bond yields over the month, so the market in a way became a little bit dysfunctional post the Bank of Japan announcement,” Ms Allen told InvestorWeekly.

“Globally, we did see government bond yields continue to fall; in the US we saw that, but also in a lot of key European markets,” she added.

The Japan decision was also another driver pushing investors to search for yield in equities.

“In terms of equities, it was just another push that central banks are there and willing to provide the liquidity if needed and push equity markets higher,” Ms Allen said.

Within equity markets, one of the stellar performers was the Italians, gaining 9.3 per cent for the month.

“We certainly did see a lot of confidence come back into the Italian market, but I also think some of that was driven by the renewed push by the leader to focus less on austerity and more on growth, which is better news for the Italian economy,” Ms Allen said.

However, while equities were generally positive, there were some notable exceptions, with the Shanghai Composite index down 2.6 percent and Korea falling by 2 percent.

In relation to China, Ms Allen said some of the data had been disappointing, while in South Korea, “geopolitical risks” and some “uncertainty about the Korean economy” fed into the share market.

Interestingly, Colonial First State worries that this massive liquidity play by the BoJ has the potential to inflate equity prices.

“Our general concern would now be that equity markets, and this is globally and for Australia as well, have seen a lot of good news baked in. We now need to see fundamental improvement in the economy and earnings output for that to continue,” Ms Allen said.

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