Asia stocks up as Trump's dollar comment boosts exporters; sterling shines

By Saikat Chatterjee

HONG KONG (Reuters) - Asian stock markets held near three-month highs on Wednesday as investors scooped up exporter shares after U.S. President-elect Donald Trump expressed concerns over a stronger dollar.

In Asia, MSCI's ex-Japan Asia-Pacific shares index rose 0.3 percent, just shy of a three-month high hit last Thursday. Stock markets in Hong Kong and China led the gains.

"Trump's comments on the dollar has helped relieve downward pressure on the renminbi and on Chinese equities and we have seen a steady pick up in capital flows from mainland investors into Hong Kong stocks," said Alex Wong, a portfolio manager at Ample Capital with $100 million in assets under management.

In early deals, Hong Kong stocks poked above a key resistance level around 23,000 which if successfully breached would position the market for further gains, according to analysts.

Moreover, capital flows via the Shanghai and the Shenzhen connect programs have flipped decisively in favour of Hong Kong stocks in recent days, indicating mainland investors are turning slowly bullish over the broader market outlook.

While investors have become somewhat optimistic on the outlook for Asian equities in the past two weeks - prompting regional markets to outperform developed market peers, underlying caution remains due to China concerns.

Gene Frieda, a portfolio manager at bond giant PIMCO, wrote in a note that though Chinese economic growth looked stable into early 2017, a more marked slowdown by the second quarter "appears inevitable" amid the backdrop of ever-increasing debt.

In currency markets, the British pound consolidated gains on Wednesday after posting its biggest rise in nearly two decades in the previous session.

Sterling's rally was triggered after Prime Minister Theresa May promised a parliamentary vote on Britain's deal to leave the EU and sought to draw a line under discussion of a "hard" or "soft" Brexit.

It was trading at 1.2350 against the dollar in early Asian hours after surging nearly 3 percent to a 10-day high in the previous session. That was the biggest climb since 1998, according to Thomson Reuters data.

The dollar's recent weakness deepened after President-elect Donald Trump said the greenback's strength against the Chinese yuan "is killing us."

The dollar was trading at 100.44 against a broad trade-weighted basket of its peers and is down nearly 3.5 percent from a near 15-year peak of 103.82 hit on Jan. 3. Against the Japanese yen it was changing hands at 112.58.

With doubts growing about the sustainability of the "Trump trade" - higher stocks and stronger dollar - safe-haven assets glittered. Gold was perched comfortably at a two-month high above 1215 dollars per ounce. It is up nearly 8 percent in the last three weeks.

Bond markets also doubted Trump's stimulus policies with the spread between ten and two year U.S. debt - an indicator of interest rate expectations - have tightened by around 20 basis points over the past month.

Oil prices were stuck in a tight range, with benchmark Brent futures steady at $55.47 per barrel as a decline in the dollar offset forecasts that U.S. and Russian producers would boost output later this year.

(Editing by Eric Meijer & Shri Navaratnam)