Chinese shares hit 3-1/2-week high, prop Asia

 

  Asian shares rose on Monday after Chinese stocks surged to a 3-1/2 week high as investors took heart from last week's encouraging data from the world's second-biggest economy, helping offset a slightly disappointing second quarter Japanese GDP report.

 

China's CSI300 advanced 1.2%, extending last Friday's rise after factory output grew in July at its fastest pace since the start of the year.

 

Data released after the market close on Friday were equally positive, showing Chinese new bank loans and money supply for July came in higher than expected despite a fall in a broad measure of liquidity.

 

"Apart from the government announcement supporting the environmental protection sector, the latest batch of economic data is lifting some pressure on traditional cyclical sectors," said a Shanghai-based dealer with a major Chinese brokerage.

 

Worries about slowing growth in China and uncertainty on when the US Federal Reserve would start to trim back its massive stimulus have roiled markets in recent months. Last week's Chinese data raised hopes that growth in Asia's economic powerhouse may be stabilising.

 

The strong gains in Chinese stocks buoyed Asian shares, with the MSCI Asia-Pacific ex-Japan index index up 0.7% to a one-week high.

 

Japanese stocks also pared losses after investors had initially cut back some of their risk exposure after data showed its economy grew at a slower-than-expected pace in April-June.

 

Tokyo's Nikkei share average fell as much as 1.4% to a six-week low and the yen strengthened after the GDP data, but they turned around in late morning trade.

 

The Nikkei ended the morning session flat, while the yen was down 0.3% at 96.590 yen to the dollar.

 

Earlier, the yen strengthened as much as 0.4% to 95.92 yen to the dollar, not far from a seven-week peak of 95.810 yen touched last week, and hit a six-week high at 127.97 yen to the euro.

 

Japan, the world's third-largest economy, grew an annualised 2.6% in the second quarter, a third straight quarter of expansion but slower than a downwardly revised 3.8% rate in the first quarter.

 

The median forecast was for annualised growth of 3.6%, and so the data may heighten calls to delay a planned sales tax increase given concerns it could delay Japan's escape from deflation.

 

Yields on benchmark 10-year Japanese government bonds, which move opposite to prices, edged down 0.5 basis point to a three-month low of 0.745%.

 

The yen has fallen 11% against the dollar this year as Prime Minister Shinzo Abe pushed for fiscal and monetary expansionary policies to revive the economy, while the Nikkei is up 30% during the same period.

 

The dollar gained 0.2% against a basket of major currencies on Monday.

 

 

STRONG SINGAPORE Q2 GDP

 

Singapore's economy grew at a better-than-expected pace in the second quarter and the government raised the city state's outlook for the year on expectations for a gradual pick up in global growth in coming months.

 

Singapore's stocks were up 0.2%, underperforming the regional market, however.

 

US stocks fell on Friday, posting their biggest weekly decline since June as investors focused on when the Federal Reserve would begin pull back its massive stimulus.

 

In the commodities markets, copper prices slipped 0.7% to around $7,226.50 a tonne after climbing 1.3% to a two-month high on Friday on the back of the upbeat Chinese factory data. They rose 3.9% last week to log their best weekly gain in almost a year.

 

Gold rose 1.2%, extending a 0.3% rise in the previous session and heading for a fourth straight day of winning streak.

 

Brent crude prices eased 0.2% to just below $108 a barrel after they advanced 1.4% on Friday to snap a five-day run of loss - the longest since April.