Bulls lift Asia stocks near 11-month highs

Bulls lift Asia stocks near 11-month highs

HONG KONG, Aug 6 — Asian stocks edged up close to 11-month highs today on strength in resource-related shares, while the Australian dollar gained after a surprise rise in employment prompted increased bets on higher interest rates.

Developed markets were favoured during the Asian session, with Japanese and Australian stocks posting gains of more than 1 per cent, while shares in Shanghai dropped on nervousness monetary authorities will take more steps to curb lending.

Japan’s Nikkei share average rose 1.3 per cent, led by Honda Motor after a report the world’s top motorcycle maker will import bikes from Thailand to sell in Japan to cut costs.

Camera maker Nikon Corp saw its shares plunge 10 per cent and was the biggest drag on the Nikkei, after it warned of a loss that would be more than double its initial forecast.

Stocks in Shanghai dropped as much as 3 per cent but then cut their losses to 2.1 per cent though the index is still up some 84 per cent this year.

China’s central bank late yesterday repeated that monetary policy will remain growth friendly, sticking with its view that the recovery was not solid, though it said it would use market tools to fine tune policy after unprecedented loan growth in the first six months of the year.

That sparked fears of increasing action by authorities to rein in abundant liquidity.

“Nearly every sector is overvalued and the whole market is very much excessively valued,” said Qian Qimin, deputy research head at Shenyin & Wanguo Securities in Shanghai.

“The market is tired. Investors are tired. Any slight negative news can now turn into the last straw to push down the market, not because the central bank is changing its policy,” Qian said.

Hong Kong shares, however, jumped 2 per cent to an 11-month closing high as early losses were erased by strong buying in China Mobile on speculation the company was on track to list in Shanghai.

Australian stocks rose 1.5 per cent to a fresh nine-month closing high, with banks leading the gains on optimism their earnings would benefit from an improved economic outlook.

Shares in Taiwan and South Korea rose by about a third of a per cent, while Singapore dipped 0.2 per cent.

India topped losses among Asian markets with a 2.5 per cent drop as profit taking resurfaced after a near-19 per cent jump over the past 3-½ weeks.


STILL CAUTIOUS

The MSCI index of Asia-Pacific stocks outside Japan climbed about 0.8 per cent, thanks to strength in telecommunications and materials stocks.

Technology and consumer-related stocks, which have been leaders throughout the rally, were the only sectors down on the day. That suggested profit taking was on the minds of investors after the index hit 11-month highs on Tuesday.

In the United States, network equipment maker Cisco Systems Inc chief executive John Chambers sounded a cautious note on recovery prospects despite giving a revenue outlook that was in line with Wall Street’s expectations.

In currency markets, the dollar was steady against the euro and sterling today as the market awaited key policy decisions by the European Central Bank and the Bank of England, while higher equities weighed on the yen.

Both the ECB and the BoE are seen leaving interest rates on hold at 1.0 and 0.5 per cent respectively, though the market will be looking for whether the central banks have adopted a more optimistic tone on the economic outlook.

The Australian dollar rose 0.2 per cent to US$0.8418, lifted by better-than-expected Australian employment data, while a higher-than-expected jobless rate in New Zealand pushed the New Zealand dollar down 0.4 per cent at US$0.6706. Australian employment increased by 32,200 jobs in July, surpassing forecasts for a 20,000 drop. That fueled expectations that Australia’s central bank will be the first among the Group of 10 countries to raise interest rates.

The Australian 1-year overnight indexed swap, an instrument to speculate on where interest rates are headed, increased by 11 basis points. Dealers priced in 71 basis points worth of tightening over the next 12 months.

US oil for September delivery slipped half a per cent to around US$71.60 (RM250.60) a barrel as fears lingered about the face of the US recovery following weak services-sector data. Still, US$72 remains an enticing obstacle for traders after the contract closed at US$71.97 overnight.

A gauge released yesterday of the US services sector – the biggest part of the economy – surprisingly reflected weakness in July, contrasting with upbeat manufacturing and investment readings. – Reuters