Asia Pacific Market: inches higher on China economic recovery hopes

Asia Pacific stocks gained momentum on Monday, as appetite for growth-linked assets improved after Chicago Fed President Charles Evans said the U.S. central bank should keep policy accommodative to boost employment and amid hopes China's economic recovery was gaining momentum. Demand for high yielding stocks also underpinned by European Central Bank President Mario Draghi said last week statement that a gradual recovery in the euro zone economy would begin this year.

Market gains were, however, limited as a number of negative economic news, caution ahead of key earnings reports from the US this week and melting hopes of additional stimulus in China and Europe kept traders away from aggressively taking positions in high yielding stocks.

 

Traders were also awaiting sideline ahead of Eurozone industrial production data late afternoon and a speech from Fed Chairman Ben Bernanke at the University of Michigan due later today in global day. Investors looked ahead to a speech by Federal Reserve Chairman Ben Bernanke on monetary policy later Monday, for status on central bank's quantitative easing program after minutes from the Fed's December policy meeting showed some voting members of the Federal Open Market Committee were increasingly worried about the potential risks of the Fed's asset purchases on financial markets. Meanwhile Chicago Fed President Charles Evans stated during weekend the U.S. central bank should keep policy accommodative to boost employment while lawmakers take steps to cut back spending.

Investors are also closely monitoring Japan's central bank as it faced unrelenting political pressure to deliver bold stimulus after Prime Minister Shinzo Abe's comments over the weekend, causing the yen to hit a fresh 2-1/2 year low on Monday.

Key economic news that hurt risk bias includes US trade data, China inflation figures, and ECB decision interest rate. The US Commerce Department stated last Friday that the nation's trade deficit unexpectedly widened to $48.7 billion in November from a revised $42.1 billion in October, with a jump in imports more than offsetting an increase in exports.

Speculation about stimulus measures in China doomed after sizable increase in Chinese inflation data last month. China's inflation jumped to 2.5% on year in December, a six-month high, driven by a surge in food costs due to unusually cold winter weather, according to National Bureau of Statistics data.

ECB left all its main interest rates unchanged in January. Thus, the refinancing rate remains at 0.75% and the deposit rate remains at 0%. Most importantly, President Draghi stated that the decision was made unanimously. Economic weakness is expected to persist into 2013. Same as in December, the central bank expects to see gradual recovery "later" in 2013.

In the Asia Pacific markets, the Australian share market has kicked off the week in positive territory despite disappointing data on home loans and job ads, with the All Ordinaries Index up 0.3% to 4745.70 at close, as investors looked overseas for leads. The local bourse got some impetus from regional markets, which were mostly trading higher and over 2% rebound in Shanghai indices after a Chinese securities regulator said Beijing could significantly increase the quota for foreign investors to invest in mainland markets.

The big miners were mostly higher, with Rio Tinto added 0.3% to A$65.99, while rival BHP lost 0.3% to A$36.57.Smaller resource companies saw significant gains, Aquila Resources jumped 7.1% to A$3.16 and Iluka Resources rose 6.5% to A$9.49. BlueScope Steel, fell 0.3% after it announced 170 job cuts and reduced production in its cold rolling, metal coated and painted steel production in Western Port. Australia's Altona Mining dropped 10.7% after announcing it may sell its Roseby copper project or seek to merge with another firm after global miner Xstrata decided not to buy into Roseby in Queensland state.

AJ Lucas surged 13.4% to A$2.08 on news that its United Kingdom subsidiary was holding talks with major investors in an attempt to replicate the shale gas revolution in the United State.

The Australian Bureau of Statistics stated on Monday that the total number of owner occupied home loans in Australia was down a seasonally adjusted 0.5% on month in November, standing at 46,199. The total value of home loans was down 0.8% m/m to A$21.46 billion. Investment lending contracted 3.3% on month to A$7.52 billion. The value of owner occupied housing loans added 0.6% on month at A$13.940 billion. The number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 15.8% in November from 18.7% in October.

Meanwhile, Job advertisements have fallen for the tenth-straight month on the back of challenging conditions for Australian businesses, an ANZ monthly survey said today. The ANZ survey, which was released this morning, showed that job advertisements dropped by 3.8% on month in December, at 133.352. That follows the upwardly revised 2.8% contraction in November, originally -2.9%. Internet job ads dropped 3.9% in December, while newspaper ads fell 0.4%. On a yearly basis, the total number of job ads was down 15.3%. A gauge measuring inflation in Australia came in higher by 0.4% on month in December, after easing 0.1% in November, TD Securities said today. On a yearly basis, CPI was called higher by 2.4%, dipping from 2.5% in the previous month.

China market outperformed the regional bourses, with the benchmark Shanghai Compsoite index advanced 3% on optimism that China's economic recovery is gaining traction.

the Mainland China market skyrocketed today, outperforming the regional bourses, as investors chased for bargain buying across the board following last week heavy selloff, with financials, aircraft, ship and, drug manufacturers led advancers. The Benchmark Shanghai Composite index spurted 68.74 40 points from 2,243 to finish today's session at 2,311.74, the highest in almost seven months.

Chinese financial sector registered solid gains, with realty shares led advancers. Poly Real Estate added 4.2% to 14.10 yuan and Gemdale Corp rose 4% to 7.08 yuan. Citic Securities Co, the nation's biggest-listed brokerage, surged 6.9% to 13.59 yuan, with Industrial & Commercial Bank of China surged 2.1% to 4.29 yuan, Bank of China 1.7% to 2.98 yuan, China Construction Bank Corp 2.6% to 4.75 yuan, and China Merchants Bank Co 4.2% to 13.84 yuan.

Shares of drugmakers and technological companies in China advanced on speculation worsening pollution will spur demand for health care and environmental protection. Hualan Biological Engineering Inc led gains for healthcare stocks, closing 10% upper circuit at 24.85 yuan. Tasly Pharmaceutical Group Co surged 3.8% to 57.21 yuan. Beijing SJ Environmental Protection and New Material Co surged 4.2% to 12.38 yuan and Nanjing CEC Environmental Protection Co rallied 5.1% to 13.62 yuan.

Chinese aircraft and ship manufacturers rallied after the official China Securities Journal reported today that the central government plans to give more support to aircraft and shipbuilding industries. Hafei Aviation Industry Co, a manufacturer of aerospace products, raised by 10% daily limit at 21.24 yuan. China Spacesat Co, a Beijing-based satellite application maker, locked 10% upper circuit at 15.53 yuan. China CSSC Holdings, the listed arm of the nation's biggest shipbuilder, rose 5.8% to 24.68 yuan. Jiangnan Heavy Industry Co, a Shanghai-based ship parts maker, climbed 6.9% to 15.28 yuan.

Great Wall Motor Co. led gains for Chinese auto shares after issuing a strong sales guidance for 2013. Great Wall jumped 6.2% to 25.60 yuan after a Xinhua news report Saturday cited a company spokesman as saying the utility vehicle maker was targeting sales of 700,000 units this year, up from 620,000 units in 2012. The 28% jump in its 2012 sales included exports of 96,000 units, which rose 16%.Anhui Jianghuai Automobile Co gained 4.1% to 6.85 yuan, SAIC Motor Corp 4.3% to 17.41 yuan, and FAW Car Co 5% to 8.01 yuan.

Hong Kong shares advanced, with financials among the top-gaining sectors as appetite for growth-linked assets improved amid hopes China's economic recovery was gaining momentum. The key Hang Seng Index jumped 149.19 points from 23,264.07 to finish at 23,413.26.

LI & Fung tumbled heavily today in Hong Kong, erasing 15.4% to HK$11.74 in reaction of surprise profit warning and subsequent brokerage houses rating downgrade. Li & Fung warned that its 2012 net profit would not be higher than that of 2011. UOB Kay Hian maintained its target price for Li & Fung at HK$9 and a sell call. JP Morgan lowered its target price to HK$11.5 from HK$11.8, and maintained its neutral rating. Nomura lowered its target price to HK$12.2 from HK$13.6, and downgraded the stock to reduce from neutral. Barclays Research lowered its target price to HK$13.5 from HK$16.2, and maintained its equal weight rating. Credit Suisse lowered its target price to HK$8.15 from HK$10.4, and maintained its underperform rating. Goldman Sachs lowered its target price to HK$13.1 from HK$17, and maintained its neutral rating.

Indian key indices closed solidly higher today, with the barometer index, Sensex, provisionally closed 279.93 points higher at 19,943.57, supported by gains in the technology, realty, consumer durables, oil & gas, banking, FMCG, capital goods and PSU heavyweights. The market gave its a thumbs up to Finance Minister P Chidambaram's decision to defer implementation General Anti-Avoidance Rules (GAAR) from April 2014 to 2016.The finance ministry had earlier said it would implement controversial rules on tax avoidance from April, 2014.

Elsewhere, Indonesia's Jakarta Composite advanced 1.8%, Malaysia's KLSE Composite grew 0.1%, New Zealand's NZX50 added 0.5%, South Korea's Kospi rose 0.5%, and Taiwan's Taiex increased marginal 0.06%. Singapore's Strait Times declined 0.3%

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