Asia Pacific Market: Clings gain line on signs of progress on multi-billion dollar US budget talks

Headline financial shares of the Asia Pacific markets advanced on Tuesday, December 18, 2012, boosting respective stock benchmarks as investor cheered signs of progress in negotiations to prevent the US economy from going over the fiscal cliff.

President Barack Obama and House Speaker John Boehner discussed about fiscal cliff in their meeting on Monday. House Speaker John Boehner proposed a tax-rate increase for the first time in the U.S. budget debate, which is a key provision called for by Obama, as he negotiates with lawmakers over a budget fix that would avoid the fiscal cliff set to take effect early next year. White House officials view the movement on rates as progress.

 

Investors have paid close attention to the negotiations, aimed at averting a package of spending cuts and tax increases next year�the so-called fiscal cliff as it's very important to have a deal done this week because none of these guys want to work next week. If they failed to reach on deal by the end of the week, market will reflect negatively.

In the Asia Pacific region, Key benchmark indices in Australia, New Zealand, Japan, China, Taiwan, India, Malaysia, and South Korea were up between 0.10% and 0.96%. Key benchmark indices in Hong Kong, Singapore, and Indonesia fell between 0.06% and 0.33%.

Australian share market rallied, sending the benchmark S&P/ASX 200 index 21.8 points higher at 4,595.2, the highest close since July 22, 2011, boosted by a rise in iron ore prices and hopes for further rate cuts in 2013 and investor optimism of a resolution to the US fiscal cliff budget talks. Top miners led the gains, with Rio Tinto up 1.9%, third-ranked iron ore miner Fortescue Metals Group up 2.9%, while mid-tier miners also benefited.

Members of the Reserve Bank of Australia's monetary policy board felt that global economic news over the past month had become more positive, minutes from the central bank's December 4 meeting revealed on today. China's growth had stabilized, the minutes said, while the U.S. economy continued to grow at a moderate pace - although the fiscal cliff remains a concern, as do the challenges presented by Europe.

New Zealand stock market rose alongside most regional peers, with the NZX 50 Index up 12.76 points, or 0.3%, to 3979.25, led by Telecom as equity markets worldwide took heart from signs of progress on fiscal cliff talks in Washington that may help the US economy avoid recession. Tech stocks Diligent Board member Services and Xero both rose.

Japan's shares extended solid gains from the previous session, with the benchmark Nikkei 225 index climbed 19.99 points to 9,848.87, as the yen remained around its lowest level since 2011 and on signs of progress in negotiations to prevent the US economy from going over the fiscal cliff. Sentiments also underpinned on hopes for positive surprise from the Bank of Japan meeting scheduled for Wednesday and Thursday. On Monday, Shinzo Abe secured Japan's prime minister role. As part of his campaign, Abe promoted more aggressive monetary expansion from the Bank of Japan.

Tokyo Electric Power staged a second powerful rally, adding 17% to 237 yen after settling up 33% Monday on continued buying on expectations for more favorable policy treatment under the incoming LDP-led government in Japan. Takashimaya Co declined 0.9% to 557 yen despite a Nikkei business daily report that it would post a 17% gain for its nine-month operating profit to November, thanks to brisk sales of winter apparel and jewelry.

South Korean stocks closed higher on signs of progress in negotiations to prevent the US economy from going over the fiscal cliff. The Korea Composite Stock Price Index (KOSPI) advanced 10.02 points, or 0.51%, to finish at 1,993.09.

Mainland China shares finally settled slight higher after moving up and down of the boundary line, with the benchmark Shanghai Composite index advanced 2.12 points from prior day to 2,162.46, registered third day of straight gain and highest level not seen since August 10, led by financials and materials heavyweights on speculation about more stimulus measures ahead after the government plans to set lower inflation target for next year. Market gains were however trimmed later afternoon after official data showed foreign investment inflows into China dwindled 5.4% from a year earlier in November.

Risk sentiments in Beijing supported by speculation government would step up stimulus move next year. The official China Securities Journal said on Tuesday that China is targeting lower inflation growth in 2013, creating room for policy-makers to ease monetary policy further. Meanwhile the latest survey by the People's Bank of China showed more Chinese bankers expect further monetary policy easing in the first quarter next year.

China's Ministry of Commerce reported that the national FDI fell 5.4% yearly in November, a decline higher than 0.24% in October, or estimates of 3.1%. For the first eleven months, the national FDI fell 3.6% yearly to US$100.02 billion.

Hong Kong shares closed mostly lower after fluctuating in and out of the neutral line, weighing the benchmark Hang Seng Index down by 18.88 points from prior day to end at 22,494.73. Benchmark index registered second day of straight fall, dragged by AIA Group after American International Group Inc announced the sale of its remaining stake in the company. AIA Group fell 3.3% to HK$30.60. Esprit Holdings declined 1.4% to HK$11.68 after issuing profit warning. Comtec Solar retreated 3.2% to HK$1.21 on controlling shareholder's disposal.

India's stocks advanced on today, with the barometer index, Sensex, provisionally closed 120.33 points higher at 19,364.75, after the Reserve Bank of India (RBI) kept interest rates on hold, but signaled a cut in the repo rate in the January-March quarter. The market sentiment was boosted by data showing that foreign funds remained net buyers on Monday, 17 December 2012.

Foreign institutional investors (FIIs) bought Indian shares worth a net Rs 886.68 crore on Monday, 17 December 2012, as per provisional data from the stock exchanges.

The Reserve Bank of India (RBI) defied market expectations by keeping banks' cash reserve ratio (CRR) unchanged at 4.25% after mid-quarter monetary policy review today, 18 December 2012. The market was expecting a 25 basis points reduction in CRR. The central bank also kept its key policy rate viz. the repo rate unchanged at 8%.

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