Asian markets advance further

Hang Seng, Shanghai consolidate gains while Sensex continued to buck the regional trend

Stock markets in Asian region advanced further on Tuesday, 28 July 2009, as investors tried to take some profit from recent rallies. The positive lead from Wall Street due to a better-than-expected surge in new home sales and better than expected earning reports consolidated belief of an economic revival.

On Wall Street, late-day buying sent stocks to a higher close Monday after earnings subdued the major indices most of the day. The Dow Jones Industrial Average rose 15.27 points, or 0.2%, to 9108.51, and the S&P 500 added 2.92 points, or 0.3%, to 982.18. The Nasdaq Composite edged up 1.93 points, or 0.1%, to 1967.89.

In the commodity market, crude oil fell in New York for the first time in four days as investors sold futures to lock in gains on concern prices have climbed too far amid expectations of a drop in demand. Oil prices rallied yesterday to a 3-week high, as equity markets climbed in the U.S. and Asia, signaling a potential economic recovery

Crude oil for September delivery declined as much as 48 cents, or 0.7%, to $67.90 a barrel in electronic trading on the New York Mercantile Exchange. It was at $68.19 a barrel at 11:31 a.m. Singapore time. Yesterday, it rose 33 cents, or 0.5%, to settle at $68.38, the highest since 1 July 2009.

Brent crude oil for September settlement traded at $71.07 a barrel, up 26 cents, on London’s ICE Futures Europe exchange at 2:36 p.m. Singapore time. Yesterday, it rose 49 cents, or 0.7%, to $70.81.

Gold gained in Asia, reversing an earlier decline, as the dollar traded near the lowest level in seven weeks against the euro and rising stocks and positive economic data spurred inflations concerns.

Gold for immediate delivery rose 0.2% to $955.82 an ounce at 2:35 p.m. in Singapore, after falling as much as 0.2%. The metal yesterday gained to $958.92, the highest since 11 June 2009. Crude oil for September delivery rose 0.3% to $68.56 a barrel.

In the currency market, US dollar remains generally soft while Aussie surges across the board, taking out 0.83 levels against dollar following upbeat comments from RBA Governor Stevens.

The Japanese yen softened to 95.16 against the US dollar.

The Hong Kong dollar was trading at HK$ 7.7500 against the dollar. Actually The Hong Kong dollar is pegged at HK$ 7.8 to the U.S. dollar but can trade between HK$ 7.75 and HK$7.85 to the U.S. dollar.

In Sydney trade, the Australian dollar raced to the year's highs after surprisingly hawkish remarks on interest rates from RBA governor Glenn Stevens fuelled bets a rate hike here may be on the horizon.

At the local close, the dollar was trading at $US0.8307, up from yesterday’s $US0.8222. It was the highest since September 2008, breaking key resistance of $US0.8265 in the process.

Coming back in equities, most Asian markets ended higher after a roller-coaster session Tuesday, with hopes for earnings growth and broker upgrades helping some indexes reverse early declines.

In Japan, the benchmark indices snapped nine days of winning streak by finishing the session edge lower, amid concerns about overheating after the key Nikkei index topping the 10,000-point level. Tokyo market hovered most of time in red as investors turned to consolidate gains amid caution over the rally’s pace after the Nikkei gained over 11% in the past nine sessions through Monday. At the closing bell, the Nikkei 225 Stock Average index has dropped 1.4 points, or 0.03%, to 10,087.26, while the broader Topix index rose 1.87 points, 0.2%, to 930.

On the economic front, the number of bankruptcies of companies related to the auto industry such as parts suppliers and secondhand car dealers shot up 50.8% in the first half of 2009 from the year before to 273, a credit research institute said Tuesday

In Mainland China, stock market finished the session edge higher with benchmark indices touched fresh fourteen month high, powered by optimism about company earnings and rising liquidity in the region. Technology shares and retailers spurted on confidence a rebound in regional economies will boost earnings. Materials were steady on optimism a global economic recovery will boost demand for the metal. Steel stocks rally on Goldman Sachs upgrade.

At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, added 0.09% to 3,438.37, while the CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, advanced 0.33% to 3,755.82.

On the economic front, China will cut gasoline and diesel prices by 220 yuan ($32) per metric ton from tomorrow to reflect a drop in global crude costs, state-run China Central Television said on its Web site today. The Chinese government controls prices under a mechanism introduced in December that takes into account crude-oil costs, taxes and a profit for refiners.

In Hong Kong, the benchmark index pared back early losses to finish the session higher, buoyed by strong gains from financials and properties as it remain darlings of the market on expectations of strong earnings performance. Materials stocks surged on firmer commodity prices. Meanwhile, shares of renewable energy companies gained on signs government spending will drive up demand for their products.

The Hang Seng Index surged 372.92 points, or 1.84%, to 20,624.54, while the Hang Seng China Enterprise Index spurted 234.96 points, or 1.93%, to 12,424.96.

On the economic front, the Hong Kong Monetary Authority said that the new residential lending in the territory soared to its highest on record in June 2009 amid low interest rates and new launches.

In Australia, the stock market posted its eleventh straight day of gains today, with most of heavyweight posting solid gains on the back of another positive lead from blue chip stocks on Wall Street and firmer commodity prices. An upbeat speech by Reserve Bank Governor Glenn Stevens also helped to lift the market.

At the closing bell, the benchmark S&P/ASX200 index surged 29.9 points, or 0.72%, to 4,169.5, meanwhile the broader All Ordinaries rose 26.2 points, or 0.63%, to 4,174.

On the economic front, the National Australian Bank (NAB) business survey for the June quarter showed business confidence index rose 20 index points to minus-four points in the quarter ended June 2009, from minus-24 points at the end of the first quarter. It also showed business conditions had improved during the period.

Meanwhile the Reserve Bank Governor has maintained his upbeat assessment on economic prospects, noting, “The downturn we are having may not turn out to be one of the more serious ones of the post-War era”. The Governor indicated that one of the biggest challenges for Australia was to ensure that cheap housing finance didn’t lead to higher house prices but rather more homes being built.

Reserve Bank of Australia Gov. Glenn Stevens also said Australia’s economy may rebound faster than the country’s central bank had predicted six months ago on improving consumer and business confidence.

In New Zealand, equities continued to rise although the momentum was subdued. The benchmark index climbed through the 3000 level for the first time in 9-1/2 months. The NZX50 rose 0.68% or 20.464 points to 3018.47. The NZX 15 increased 0.49% or 27.41 points to close at 5599.11.

On the economic front, New Zealand’s value of seasonally adjusted exports and imports both fell in the June 2009 quarter, down 5.4 percent and 3.4 percent, respectively, Statistics New Zealand said on Tuesday. These falls followed decreases of 5.0 percent for exports and 13.7 percent for imports in the March 2009 quarter. New Zealand's trade deficit grew faster than expected in June. Exports for the month of June were valued at NZ$3.2 billion, a decrease of NZ$395 million or 11.0 percent from the month before. Import values totaled NZ$3.6 billion, down NZ$192 million or 5.1% on month.

In South Korea, stocks closed higher as foreigners continued their buying spree on hopes of positive U.S. consumer data. The benchmark Korea Composite Stock Price Index (KOSPI) inched up 1.98 points to 1,526.03 in range-bound trading.

In Singapore, the stock market rose on tracking positive lead from Wall Street overnight and other Asian market, boosted by expectation for upbeat economic data and better than expected corporate results. Major blue chip stocks outperformed on hopes of strong results from leading companies and confidence about a US economic recovery. Banks extended gains on tacking US peers. Manufacturing and multi-industries stocks surged amid bullish sentiment emanating from stronger equity markets and positive economic data. The blue chip Straits Times Index surged 47.38 points, or 1.84%, to 2,624.04.

In Philippines, the stock market hit eleven months high level, as investors seemed to have shrugged off political noise and focused on the bright economic prospects going forward. The benchmark index PSEi mounted 1.32% or 36.14 points to 2,768.76,highest since 4 September 2008, while the All Shares index increased 1.34% or 23.19 points to 1,753.85.

Manufactures reduced output for the seventh consecutive month in May but at a slower rate, indicating a revival in demand from both domestic and external markets. Factory output — as measured by the volume of production index — plunged by 13% in May from a year ago, a softer annual decline than April’s -18.2%, the National Statistics Office (NSO) reported yesterday. The month-on-month result was better, with production growing by 8% as sales rebounded. Monthly output in April fell by -contracted by 3.2%.

The National Government yesterday raised more funds than planned on its most successful auction so far this year. The auction committee took advantage of the drastic decline in the yields of its short-term debts as driven by high demand and by the ample liquidity that has been running in the system for weeks now thus, should already be put to work. The market was obviously very liquid that even without the maturing government debts this week amounting to P5.4 billion, it still had sufficient and enough cash.

In India, key benchmark indices ended with modest losses after swinging wildly either ways during the course of the day. Volatility rose after the Reserve Bank of India raised inflation forecast while keeping key policy rates unchanged at their historically low level at a quarterly monetary policy review today. The BSE 30-share Sensex went down 43.10 points or 0.28% to 15,331.94. The S&P CNX Nifty went down 8.20 points or 0.18 % to 4,564.10.

On the economic front, the RBI has kept the key rates unchanged and increased the inflation forecast to 5% by end March 2010 from earlier 4%. The central bank raised its inflation forecast, saying an uncertain outlook for monsoon rains could "accentuate" inflation for already-high food prices. The repo rate, at which the central bank lends cash to banks, stays at 4.75%, and the reverse repo rate, at which it absorbs surplus cash from the banking system, stays at 3.25%. Both these rates are at record low level. The statutory liquidity ratio (SLR) was also kept unchanged at 24%.

The RBI also kept the cash reserve ratio (CRR), the amount of funds banks have to keep on deposit with it, unchanged at 5%. The RBI said the deposit growth is seen at 19% adding that there is scope for the banks to cut interest rates. The GDP is expected to grow at 6% in FY 2010, with an upward bias, the central bank said

RBI said it would maintain an accommodative monetary stance until robust signs of recovery in the economy are visible. The central bank will be ready with a roadmap to reverse the expansionary stance quickly and effectively thereafter. The Reserve Bank of India will have to reverse the expansionary measures to anchor inflation expectations and subdue inflationary pressures while preserving the growth momentum the exit strategy will be modulated in accordance with the evolving macroeconomic developments, the RBI said.

The conduct of monetary policy will continue to condition and contain perception of inflation in the range of 4% to 4.5%. This will be in line with the medium-term objective of 3% inflation consistent with India's broader integration with the global economy, the RBI said.

The central bank said it would actively manage liquidity to avoid government borrowing crowding out private credit demand. RBI also said that government will need to return to a path of fiscal consolidation.

Elsewhere, Malaysia's Kula Lumpur Composite index went up 1.38% or 15.95 points to 1172.38 while stock markets in Indonesia’s Jakarta Composite index ended the day higher at 2237.10.

In other regional markets, European shares struggled to gain for the 11th time in 12 sessions, as investors took on board a mixed bag of earnings from companies such as EADS, BBVA, Deutsche Bank and BP. At the regional level as the U.K. FTSE 100 index declined 0.23% or 10.37 points to 4,576, the German DAX index traded flat at 5,256 and the French CAC-40 index was also flat at 3,375.