Asia-Pacific markets surge on easing Europe worries, strong China manufacturing data

Markets clung to hopes that European policymakers were moving a step closer to resolve the region’s debt crisis.

Asia-Pacific markets expanded gains throughout the day after kicking off the new trading week in positive fashion, with the Thomson Reuter Asia-Pacific index climbed up 2.37% at 155.93 while the MSCI Asia index (excluding Japan) surged 3.45% at 474.53 Monday, October 24, 2011, as appetite for riskier assets rejuvenated after better than expected reading on China's HSBC October flash PMI data and Japan export data, and on growing optimism that eurozone leaders may announce stronger rescue package for the region's struggling economies.



Risk appetite spirited by growing expectations that European policymakers were moving a step closer on comprehensive plan to stemming the region's debt crisis and final decisions would be announced at a second summit scheduled for this Wednesday. Most of EU leaders have agreeing on recapitalization of euro-zone banks and expansion of the European Financial Stability Facility. Reports suggested that possible measures would include a larger eurozone's rescue fund, a recapitalization plan for banks, and a bigger haircut for Greek bondholders.

Gaining momentum also amplified after HSBC's China Flash PMI showed the Chinese manufacturing sector picked up to 51.1 in October, a five month high, after a three-month contraction as both new orders and new export orders strengthened, underscoring the resilience of the world's second-largest economy. China manufacturing output index rose to 6 month high of 51.7 during the month from 50.3 in September. PMI reading above 50 indicates expansion of the sector, while a score below 50 suggests contraction.

In addition better than expected reading on Japan export figures further supported rally. The Japan Finance Ministry reported on Monday that Japan's trade surplus on a customs-cleared basis hit 300.4 billion yen in September, falling 61.2% on the year but marking a return to the black for the first time in two months. Exports rose 2.4% to 5.98 trillion yen, partly due to an increase in exports of cars, while imports expanded 12.1% to 5.68 trillion yen, mainly due to an increase in fuel imports.

Despite a positive day, investors mood remain subdued amidst France and Germany remain divided over a possible Greek restructuring and changes to the Lisbon Treaty. European leaders and finance ministers failed to reach a comprehensive decision during weekend meetings to deal with the European Sovereign Debt Crisis and prevent further contagion to non-peripheral nations.

Back to countries, the Japanese benchmark Nikkei Stock Average surged 1.9% at 8,843.98, as risk appetite buying emerged across the board after better than expected reading on domestic export figures and China's HSBC October flash PMI data, and euphoria that the EU will come up with solution to take on debt crisis by 26 October.

Most of stocks ended well above break-even line, with export related stocks led rally, buoyed by upbeat reading on export data and the yen's fall against the dollar. Meanwhile resources and oil & coal stocks, and commodity traders moved up, thanks to positive trade on base metals and crude oil futures in Asian deal.

Tokyo Electric Power gained 8% at 284 yen on Nikkei newspaper report that the firm will sell down some 300 billion yen of shares it holds to finance compensation claims. The firm also reportedly plans to sell a 20% interest in Eurus Energy Holdings Corp. to Toyota Tsusho for an estimated 20 billion yen and apply half of the proceeds to compensation claims.

Olympus stumbled 11% to 1,099 yen, after erasing more than 50% in prior six sessions, amid scrutiny over pricy acquisition fees it paid in the past. The company said Friday it is preparing to set up a third-party committee consisting of lawyers, accountants and other experts, to look into the company's past M&A activities.

In Australia, All Ordinaries index closed up by 2.62% to 4,313.60, registered first gain in three sessions, powered by better than expected reading on China's HSBC October flash PMI data and growing optimism that eurozone leaders may announce stronger rescue package for the region's struggling economies. All sectors finished sharp higher with the mining and energy sectors the best improvers in percentage terms.

Specialty pharmaceutical firm Pharmaxis surged 50% to A$1.41 on news that company new treatments for undertreated respiratory diseases is a step closer to securing approval to market its cystic fibrosis drug, bronchitol, in Europe.

In China, local stockmarket widened gains in the afternoon, after seesawing between positive and negative during morning, with the benchmark Shanghai Composite index closed at 2,370.33, surged by 43.06 points or 2.29% on Monday, October 24, 2011, registered first gain in five sessions in row, powered by bargain hunting across the sectors with financials led the rally.

Volatilities ruled the market entire morning after Premier Wen Jiabao's pledge that his government would maintain anti-inflation monetary policies while more than 750 firms said they had made profits in the third quarter. But market moved up sharply in afternoon after HSBC's China Flash PMI showed the Chinese manufacturing sector picked up to 51.1 in October, a five month high, after a three-month contraction as both new orders and new export orders strengthened, underscoring the resilience of the world's second-largest economy.

Banks and financials were sharp higher, with brokerage houses led rally after China Securities Journal stated the country would soon roll out plans to expand its pilot scheme for margin trading and short selling of stocks by increasing the number of collateral stocks and other securities used in the program.

CITIC Securities gained 3.2% to 11.64 yuan and Haitong Securities hiked 6.7% to 9.10 yuan. China Minsheng Banking gained 2.4% to 5.98 yuan and Bank of China 1.4% at 3 yuan.

Yanzhou Coal Mining Co. fell 1.3% to 25.18 yuan, suffered by disappointing third quarter earnings repo. Coal producer said on Friday that its net income was down by 70% from a year earlier in the third quarter because of foreign-exchange losses

Hong Kong stockmarket finished the session sharp higher, with the benchmark Hang Seng index up 4.14% at 18,771.82. Investor sentiment was boosted by impressive gains in US and European share markets on Friday, while better than expected reading on China's HSBC October flash PMI data added to the overall buying mood. Risk appetite also spirited by growing hopes that European policymakers will come up with solution to take on debt crisis by 26 October. All sectors ended higher with the financials, mining, and energy sectors were the best improvers.

All blue chips ended in positive territory. HSBC rose 3% to HK$65.05. China Mobile gained 2% to HK$76.3. BEA soared 5.5% to HK$27.05 after its Spanish shareholder Caixa Bank said its 16.03% stake in BEA is a long-term investment. Li & Fung jumped 7.7% to HK$13.66 after Barclays Capital said in a report that major retailers, which include Li& Fung's clients Wal-Mart and Khol's, in the US had reported strong sales. China Coal sparkled 7.6% to HK$8.75 after the company reported 65.14% surge in net profit at 2.66 billion yuan in September quarter.

Yanzhou Coal closed 4.1% higher at HK$18.84, erasing morning losses which caused by disappointing third quarter earnings repot. Coal producer said on Friday that its net income was down by 70% from a year earlier in the third quarter because of foreign-exchange losses.

In India, the Bombay Stock Exchange SENSEX30 closed 0.92% higher at 16,939.28, trimming earlier gains, as profit booking emerged before finishing after European stocks moved off initial highs after the latest data showed the preliminary composite purchasing managers index for the euro zone fell to 47.2 in October 2011, its lowest reading since July 2009.

Index heavyweight Reliance Industries (RIL) advanced on fresh buying. Engineering & construction major L&T extended Friday's (21 October 2011) losses triggered by the engineering and construction giant cutting its order growth guidance for the current year. Cigarette major ITC rose after reporting strong Q2 results. Interest rate sensitive banking and realty stocks extended recent gains triggered by hopes that a slowing economy may prompt the Reserve Bank of India (RBI) to pause on rate increases after another 25 basis points hike in repo rate at a policy review tomorrow, 25 October 2011. Tata Motors galloped on fund raising plans.

Among other Asian bourses, the Malaysia KLSE increased 0.78% to 1,450.02. Singapore Strait Times index rose 1.79% to 2,760.95. Indonesia Jakarta Composite index was up 2.38% to 3,706.78. The South Korea KOSPI rose 3.26% to 1,898.32. The Taiwan TAIEX index put on 2.97% to 7,470.30. The New Zealand sharemarket closed today for Labour Day. Thailand's sharemarket closed today for a national public holiday.