Asia Pacific Market: Stocks end higher, China leads rally, Japan pullbacks

Asia Pacific share markets gained on Monday, January 28, 2013, as investors appetite for risk assets underpinned globally, thanks to better than expected China's industrial profit data, upbeat US earnings news, and encouraging news out of Europe.

The National Bureau of Statistics of China's released industrial firms earnings data on Sunday showing that profit at major Chinese industrial enterprises grew 17.3% year on year to 895.2 billion yuan in December, after registering a 25.4% jump previous month. Last year, industrial profit totaled 5.6 trillion yuan, up 5.3% from 2011.

US stock market closed higher last Friday as encouraging earnings news from the Procter & Gamble and Starbucks helped investors shrug off a report from the Commerce Department showing an unexpected drop in new home sales. Procter & Gamble (PG) reported adjusted earnings of $1.22 per share on revenues of $22.2 billion. The consumer products giant also raised its guidance for 2013. Starbucks said that its profit rose 13% in the latest quarter, helped by a 6% increase in global sales at cafes open at least a year.

Sales of new homes in the U.S. fell in December but ended 2012 well above a year earlier, marking the beginnings of a recovery for the building industry. New single-family home sales decreased by 7.3% last month from November to a seasonally adjusted annual rate of 369,000, the Commerce Department said Friday.

Comments from ECB President Mario Draghi also boosted investor sentiment. European Central Bank president Mario Draghi said on Friday that the Eurozone economy is set to start recovering in the second half of 2013. The ECB chief, however, warned that the region's economic troubles are far from over, and much needs to be done to sustain the growth momentum as the current stabilization is at very low levels.

A round of encouraging economic data points out of Germany, the Eurozone's largest economy, also helped bolster risk appetite. Last week, a report showed that Germany's Ifo index of business confidence improved to a seven-month high of 104.2 this month from 102.4 in December.

In the Asia Pacific Market, Japanese market settled lower on Monday, underperformer among regional peers, as wave of profit taking. The benchmark Nikkei Stock Average closed down by 102.34 points from prior day closure to 10,824.31 while the broader Topix index dropped 3.31 points at 913.78.

Key Japanese indices jumped at the start, with the benchmark Nikkei225 index briefly topping 11,000 marks early hours for the first time since April 30, 2010, helped by a lower yen against the major currencies. But benchmark failed to hold initial momentum as many investors later began selling stocks to lock in gains on pause in the yen's decline and cautious ahead of the start of prominent Japanese companies quarterly results with results from Toshiba, Nomura Holdings, ANA, Softbank, and many others peaking on Thursday. Investor sentiment worsened after some companies, whose stocks have a big impact on the Nikkei average, cut their earnings forecasts

The Japanese government raised 2013/14 growth forecast to 2.5%, comparing to August projection of 1.7%, as the country emerge from recession. CPI growth is expected to be at 0.5%. Finance minister Aso predicted that there will be 43.1 trillion yen in tax revenue in 2013/14. Total spending is expected to be at 92.6 trillion yen while there would be 42.85 trillion yen raised from bond issues.

Shares of Shin-Etsu Chemical Co fell 2.7% to 5,480 yen after a Nikkei report Saturday tipped a mild gain for the firm's April-December operations profit, Fanuc Corp dropped 7% to 13,550 yen after reporting a decrease in its nine-month profit and cutting its full-year outlook. Robot-maker trimmed its net profit outlook for the current fiscal year to 116 billion yen from 136 billion yen previously.

Hitachi High-Tech surrendered 10% to 1,768 yen after its third quarter results sparked fears that a big earnings undershoot is likely for the full fiscal year. The firm's October-December operating profit figure of 0.1 billion yen came in well below its own forecast of about 2.5 billion yen. Advantest dropped 5.3% to 1,250 yen on reports about a possible decline in the firm's fiscal 2012 earnings.

New Zealand shares rose again today, with the benchmark NZX50 closed 4.62 points higher at 4,204.44, above psychological important 4,200 marks, even though Fonterra fought a global media blitz to allay concerns about the safety of New Zealand milk. Turnover was very light on a day when markets in Auckland and Australia were shut for public holidays, at NZ$43.830 million.

Positive finishing of NZ market credited to transport and logistics firm Freightways, which put on 2.1% to close at NZ$4.45, followed by a 1.9% uptick in Skellerup Holdings shares to close at NZ$1.65. However, all eyes were on Fonterra Shareholders Fund unit prices on the first trading day since global media began paying attention to the discovery of minute traces of a chemical used to reduce greenhouse gas emissions from cattle, in milk powder. Fonterra units fell from NZ$4.23 over the day to close at NZ$7.13.

China's share market sparkled today, best performer in the Asia Pacific region, with the benchmark Shanghai Composite index advanced 55.20 points to 2,346.51, as a bout of bottom hunting after the China's think tank forecasted domestic economy to grow at around 8.4% this year and industrial profit increased for a fourth consecutive month in December.

Chen Xikang, a researcher at the Chinese Academy of Social Sciences, forecasted in the research paper that China's economy is to grow at around 8.4% in 2013. Chen Xikang predicted growth in China's consumer price index will be at around 3.5% this year and overall trade in China is expected to grow 8.5% this year, while exports are expected to grow 8.3%. China's economy grew 7.8% in 2012, while the inflation rate was at 2.6% for the full year. Meanwhile Yi Gang, governor of the China's central bank, said during a debate at the World Economic Forum in Davos, Switzerland that China's growth rate will be about 8% this year. He said consumer price inflation could reach 3% or slightly higher.

Buying momentum in Mainland bourses propelled further on growing optimism over corporate earnings outlook after industrial earnings data showed profit at major Chinese industrial enterprises grew 17.3% year on year to 895.2 billion yuan in December, after registering a 25.4% jump previous month. Last year, industrial profit totaled 5.6 trillion yuan, up 5.3% from 2011.

Shares of brokerage houses were top performer in China on reports Shanghai stock exchange bourse will expand the number of stocks allowable for margin trading and short selling to 300 from Jan. 31 and Shenzhen will increase the number to 200 from 98. Among brokerage companies, Citic Securities, the largest-listed brokerage, jumped 5.9% to 14.34 yuan. Haitong Securities Co., the second-biggest, rose 8.1% to 11.01 yuan. Guoyuan Securities Co. gained 4.3% to 11.17 yuan.

Dongfeng Automobile Co locked 10% upper circuit at 3.39 yuan in Shanghai following news that Swedish truck maker Volvo AB is planning a joint venture with the Chinese firm to produce heavy vehicles.

HK stock market closed higher, with the benchmark Hang Seng Index ended up 91 points to 23,671, boosted by strategic co-operation deals signed by local banks with Qianhai enterprise for cross-border RMB lending.

In the Hang Seng, 32 out of 50 blue chips shares advanced today, while 15 declined and remaining 3 unchanged. Hengan International Group Co was biggest gainer in the index, adding 2.5% to HK$78.25, while Sands China dropped 2.6% to HK$37.55, making it worst performer blue-chip in reaction of company's interim dividend announcement The company declared an interim dividend of HK$0.67 per share, which will be paid around 28 February. HK banks were higher on Qianhai cross-border RMB lending deals. Hang Seng added 1.1% to HK$125.9. BEA gained 1.3% to HK$32.2. BOCHK and BOC edged up 0.8% to hK$26.65 and HK$3.79.

China Cosco Holdings Co dropped 5.1% to HK$4.08 after issuing profit warning. The shipping company expected the Group to record a significant net loss for the year ended 31 December 2012, as compared to the loss of 10.45 billion yuan in the previous financial year.

Indian benchmark indices registered small losses on the first trading day of the week. The barometer index, BSE Sensex, was provisionally down 10.40 points or 0.05%, off 79.32 points from the day's high and up 30.34 points from the day's low. Index heavyweight and cigarette maker ITC rose marginally. Another index heavyweight Reliance Industries (RIL) extended intraday losses in late trade. The market breadth, indicating the overall health of the market, was positive.

Interest rate sensitive automobile and realty stocks rose as the Reserve Bank of India (RBI) is seen cutting its key policy rate viz. the repo rate by 25 basis points (bsp) at Third Quarter Review of Monetary Policy 2012-13 tomorrow, 29 January 2013. Reliance Infrastructure (RInfra) edged lower as an exceptional one-time profit of Rs 418.34 crore on sale of shares of Reliance Power lifted the company's bottom line in Q3 December 2012. Adani Power dropped as the company's net loss widened in Q3 December 2012 over Q3 December 2011. Adani Ports and Special Economic Zone surged after the company's board of directors gave in-principle approval to divest the company's significant stake in entities controlling the Abbot Point Coal Terminal in Queensland, Australia to the Adani family.

Elsewhere, Taiwan's Taiex index rose by 0.55% and Singapore's STI added 0.14%, while Indonesia's Jakarta Composite dropped 0.5% and South Korea's KOSPI Composite fell 0.4%. Stock market in Australia and Malaysia closed for public holiday.

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