Asia ekes out modest gains

Gains capped for broad markets as dollar continues to show conviction

Asian markets moved up today, cutting yesterday's losses as risk appetite flipped back and buying ticked up right from the start though a negative close for Japanese and Chinese stocks did not go well for the investors. Buoyant results from Citigroup yesterday lead to reprieve for the financial shares and positive overnight cues from Wall Street and a rebound in commodities helped the market sentiments turn around. However, a stubborn show of strength by the US dollar in much of Asian trades capped the upside for the regional benchmarks, most of them coming off the days highs in the closing hours.

The risk appetite was seemingly strong at the start of the day but waned somewhat as the US dollar turned the corner after hitting a high of 1.3523 against the Euro. The single currency once again firmed up under 1.3500 as worries continued about the sorry state of Greece finances.

The Australian market ended in positive territory taking cues from Wall Street where the major averages ended with modest gains following reports that the SEC vote on charging Goldman Sachs was split. The benchmark S&P/ASX200 Index advanced 10.70 points, or 0.22% to close at 4926, while the All-Ordinaries Index ended at 4,949, representing a gain of 10.10 points, or 0.20%.

On economic front, minutes of the recent board meeting of Reserve Bank of Australia revealed that the members of the policy board felt this month that a rate increase was warranted given a faster than expected recovery in the country's terms of trade. The members also hinted that more rate hikes will be necessary as the Australian economy continues its robust rebound from the global downturn.

Japanese stocks ended mixed with Nikkei ending weaker while broader Topix Index ended in positive territory, as exporters and commodity stocks slipped in late trading session on yen strength and profit selling. The benchmark Nikkei 225 Index fell 8.09 points, or 0.1%, to 10901, while the broader Topix index of all First Section issues rose 1.27 points, or 0.1%, to 972.

On the economic front, a report released by the Ministry of Economy, Trade and Industry revealed that an index measuring tertiary industrial activity in the country declined a seasonally adjusted 0.2% in February compared to the previous month. Economists expected the index to contract 1% for the month following 2.9% increase in the previous month.

However, Chinese markets failed to swing around after a ferocious slide yesterday. About two stocks rose for each one that fell on the Shanghai Composite Index, which lost 0.76 point, or less than 0.1 %, to 2979.53 at the close. Chinese shares, down nearly 5 % on Monday before after government took more action to restrain property prices, were hurt by lack of buying conviction as the overheating worries remained firmly entrenched.

Hong Kong stocks pulled back from a three-week low today with domestic plays such as China Mobile rising on expectations of consumption growth on the mainland. The benchmark Hang Seng Index closed up 1.02 % at 21623.

In Mumbai, the key benchmark indices eked out small gains, snapping last five days' losses, after the Reserve Bank of India (RBI) announced a small increase in policy rates at a monetary policy review. Firm global stocks also supported the domestic bourses. The BSE 30-share Sensex was provisionally up 60.68 points or 0.35%. Interest rate sensitive banking, auto and realty stocks rose. Index heavyweight Reliance Industries (RIL) edged higher in volatile trade.

Investors heaved a sigh of relief after a small hike in short term rates and cash reserve ratio (CRR) by the central bank. Reserve Bank of India (RBI) raised repo rate, reverse repo rate and CRR by 25 basis points each. Analysts were expecting a 25 to 50 basis points hike in short term rates and the CRR. The RBI said it will continue to monitor macroeconomic conditions, particularly the price situation closely and take further action as warranted.

The hike in CRR is effective from 24 April 2010 while repo and reverse repo rate hikes are applicable immediately. After the hike, the CRR will increase to 6%, the repo rate to 5.25% and the reverse repo to 3.75%. Repo is the rate at which the central bank lends to banks and reverse repo is the rate at which the central bank absorbs excess cash from the banking system. CRR is the portion of deposits banks must set aside with the RBI.

Most Asian markets rebounded modestly, following Wall Street higher as financial stocks recovered from a sell-off prompted by the U.S. government's fraud case against Goldman Sachs.

In other markets, South Korea's Kospi closed up 0.8 % while Thailand's key stock measure surged more than 3 %.

Light sweet crude oil futures for June delivery were last seen quoting at $83.95, up 82 cents from the previous close. The commodity raced up earlier, after the yesterday's drop of nearly two dollars. Prices failed to hold on above $84 as the strength in the US dollar curbed the gains and some selling emerged ahead of the API inventories data, which is due later on today.