Asian markets makes headway on Monday

Enters August with renewed hopes about global recovery

Stock market in Asian region enter August with caution as regional markets closed higher on Monday, 3 August 2009, as investors turned conservative in most of the markets in the region. After taking positive cues from Wall Street are slightly positive the regional markets continued to seesaw between gains and losses. However, some positive manufacturing report from China and India boosted investor’s confidence towards the end. Energy and materials stocks are seen edging higher after a weak start. Consumer staples, healthcare and utilities stocks are mostly trading lower.

On Wall Street, stock markets capped off a stellar July with a mellow trading session after the government reported that the economy shrank again in the second quarter but not as badly as expected. The Dow Jones Industrial Average rose 17.15 points, or 0.2% to 9171.61, while the S&P 500 gained 0.72 points, or 0.07%, to 987.47. The Nasdaq Composite fell 5.8 points, or 0.3%, to 1978.5.

The day's action wasn't much, but the major indices had their best performance for a July in years. The Dow rose 8.6%, the S&P 500 added 7.4%, and the Nasdaq tacked on 7.8% for the month. It was the best monthly performance percentage wise since October 2002. It was also the best July month in percentage terms since 1989 when it rose 9.04%. Point wise it was the biggest gain in its history.

On the economic front, the advance reading on GDP, the most anticipated economic data of the week, indicated national production shrank by 1% in the second quarter, which was less severe than expected. However, first- quarter GDP was revised to reflect a 6.4% drop rather than the previously reported 5.5% decline. GDP has now fallen for four straight quarters, the first time since government records started in 1947.

In the commodity market, crude oil traded above $70 a barrel for the first time in a month on speculation fuel demand will increase, as equities in Asia gained for a third day amid signs the global economy is recovering.

Crude oil for September delivery rose as much as 88 cents, or 1.3 percent, to $70.33 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $70.30 a barrel at 2:23 p.m. in Singapore. Crude reached $71.85 a barrel on 1 July 2009.

Brent crude oil for September settlement gained as much as 78 cents, or 1.1 percent, to $72.48 a barrel on London’s ICE Futures Europe exchange. It traded at $72.34 a barrel at 2:23 p.m. Singapore time.

Gold advanced for a third day as signs of recovery in the global economy weakened the dollar and increased demand for the precious metal. Gold for immediate delivery added $1.42, or 0.2 percent, to $955.42 an ounce by 9:44 a.m. in London. Gold for December delivery, the most active contract rose $1, or 0.1%, to $956.80 an ounce on the Comex division of the New York Mercantile Exchange.

In the currency market, US dollar remains generally soft as the week starts, edged lower against most major currencies before recovering mildly.

The Japanese yen was quoted at 94.62 against the US dollar, down from Friday's quote of 95.60-61 yen.

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 has closed above $US0.8350 for the first time in 10 months, after better than expected US economic data boosted commodity prices and lent support to resource-based currencies such as the local unit.

At the local close, the dollar was trading at $US0.8357, up from Friday's close of $US0.8279. It was the highest domestic close for the Australian dollar since September 25 last year when it ended the local session at $US0.8391. During the domestic session, the unit moved between a low of $US0.8339 and a high of $US0.8392.

In Wellington trade, the New Zealand dollar rose today in defiance of the Reserve Bank of New Zealand's latest attempt to talk it down. The NZ dollar fell as low as US 64.75 cents yesterday when the Reserve Bank said it would reassess policy settings if the economic recovery were put at risk. The central bank held its official cash rate unchanged at 2.5%. The NZ dollar recovered to US 65.68 cents at 5 pm from US 64.95 cents at the same time yesterday.

The South Korean won ended at a new yearly high of 1,222.4 won against the greenback, up 6.1 won from Friday's close, as overseas investors were net buyers of local shares for a 14th session.

The Taiwan dollar strengthened strongly against the greenback. The Taiwan dollar added against the US dollar as it was trading higher at NT$ 32.7720, up by NT$ 0.0460 from Friday’s close of NT$32.8180.

Coming back in equities, Asian markets ended mostly higher Monday, with resource and shipping shares jumping in line with commodity prices and as data showed Chinese manufacturing activity continued to gather pace in July.

In Japan, the share market finished the session in mixed terrain, as gains from banks and auto shares on upbeat earnings outlooks overshadowed by quick profit amid caution about an overheated market. Casio Computer and Fuji film Holdings tumbled on depressing earning report. At the closing bell, the Nikkei 225 Stock Average index eased 4.36 points, or 0.04%, to 10,352.47, while the broader Topix index rose 7.3 points, 0.8%, to 958.

In Mainland China, benchmark indices surged as bargain hunters stepped in on more signs of economic activity picking up speed. Shares of materials led the rally after manufacturing expanded and higher prices for the commodities. At the closing bell, the Shanghai Composite Index, measuring A shares and B shares on the Shanghai Stock Exchange, surged 1.48%, or 50.53 points, to 3,462.59, while the CSI 300 Index, measuring exchanges in Shanghai and Shenzhen, spurted 1.4% to 3,787.03.

On the economic front, the China Federation of Logistics & Purchasing said China's Purchasing Manager's Index, a major indicator of the strength of the manufacturing sector, rose seasonally adjusted 53.3 in July 2009, from 53.2 June 2009.

In Hong Kong, the benchmark index surged with gains across the sectors as a set of solid corporate results overseas-revived hopes for a global economic recovery. Shares of materials and energy led the rally after China manufacturing expanded in July. Financials and properties rebounded amid more sign of an economic recovery. The Hang Seng Index spurted 233.93 points, or 1.14%, to 20,807.93, while the Hang Seng China Enterprise gained 244.61 points, or 2.01%, to 12,368.20.

In Australia, the stock market surged backed by strength in the financials sector after Goldman Sachs JB Were upgraded the big four banks. Materials and recourses bounced on higher base metal prices. At the closing bell, the benchmark S&P/ASX200 index surged 19.4 points, or 0.46%, to 4,263.4, meanwhile the broader All Ordinaries spurted 21 points, or 0.49%, to 4,270.5.

On the economic front, total Australian job ads fell by 1.7% in July 2009 from previous month. Newspaper ads declined 0.4% while jobs advertised online was down 1.8%. A key-manufacturing index rose 6.1 index points in July to its highest level in 10 months. The figure remained in contraction territory at 44.5 points, however was the third successive month of easing.

In New Zealand, equities commenced the first trading day of the week in the green region, registering the third day of gain in a row on Monday. The NZX50 moved forward 1.05% or 31.65 points to 3047.85. The NZX 15 increased 1.41% or 78.34 points to close at 5638.34.

On the economic front, as per the summary of the monthly economic indicators released by the treasury, recent data point to weak domestic demand in the June quarter, in line with forecasts. The outlook for the second half of the year is more positive, but still weak. The New Zealand economy is expected to shrink 0.2% in the September quarter after easing 0.4% in the second quarter. Net migration is expected to provide near-term support for the housing market. International outlook improves, with risk appetite driving the New Zealand dollar higher.

In South Korea, shares closed higher as strong foreign buying drove up brokerages, auto firms and machinery makers. The benchmark Korea Composite Stock Price Index (KOSPI) added 7.69 points to 1,564.98, a new high for this year.

On the economic front, the National Statistical Office reported earlier in the day that the consumer price index rose a lower-than-expected 1.6% in July from a year earlier, the slowest annual growth since May 2000.

In Singapore, the stock market spurted as investors step in for dip buying in properties and construction shares amid sign of an economic recovery strengthening hopes of demand revival. Shares of major blue chip rebounded amid more sign of an economic recovery. The blue chip Straits Times Index put on 22.44 points, or 0.84%, to 2,681.64.

In Taiwan, stock market failed to carry July jubilance in August as the benchmark index closed the first trading day of the month as well as the week on lower note, thanks to smart phone maker HTC led technology shares down after it slashed its revenue forecast for 2009. The positive cues from Wall Street could not succeed in setting the flavor in the domestic markets. The main Taiex share index started the week on a silent note as the Taiex index fell 21 points or 0.30%, closing the day at 7056.71.

In Philippines, the stock market closed more than 1% higher buoyed by razor sharp gains in the key heavy weight stocks, especially the mining & oil index. Mining & oil index gained more than 7% dragging the composite index higher. Moreover, as investor’s are positive about the earning reports to be released this week by the local companies, which in turn led to the buying of key blue chips. The benchmark index PSEi mounted 1.31% or 36.78 points to 2,835.11, while the All Shares index climbed 1.01% or 17.90 points to 1,786.06.

On the economic front, inflation is likely decelerated further last month. Low inflation will give the central bank more leeway to consider cutting reserve requirement, though they might wait until the release of the second quarter economic data. However, the market is still divided on the central bank's next move. Some market player’s do not expect a drop in inflation to prod the central bank to ease rates further in a meeting this month, policymakers may look at other monetary tools such as lower reserve requirement on bank deposits. While some believe there is a chance of a 25 bps rate cut if inflation falls below 1%. Manila will release on 5 August inflation data for July which is expected to be the lowest in 22 years.

In India, the key benchmark indices extended gains in late trade as European stocks and US index futures rose. Sign of recovery in the Indian economy, better-than-expected Q1 June 2009 results from India, which just got over and buying by foreign funds underpinned sentiment.

The BSE 30-share Sensex was up 253.92 points or 1.62% to 15,924.23. The Sensex rose 293.05 points at the day's high of 15,963.36 in late trade, its highest level since 6 June 2008. The S&P CNX Nifty was up 74.95 points or 1.62% to 4,711.40. It hit a high of 4,723.75, its highest level since 6 June 2008.

Elsewhere, Malaysia's Kula Lumpur Composite index went down 0.31% or 3.59 points to 1171.31 while stock markets in Indonesia’s Jakarta Composite index ended the day higher at 2338.80.

In other regional market, European shares traded higher on Monday, with banks advancing after reports that UBS may avoid a fine from the U.S. and Barclays reported a profit. On a regional level, the German DAX index rose 1.67% or 89.18 points to 5,421, the French CAC-40 index climbed 1.50% or 51.33 points to 3,478 and the U.K. FTSE 100 index edged up 1.70% or 78.35 points to 4,687.