Asia Pacific Market: Shares shine on signs of bipartisanship on US budget talks

Asia Pacific shares were higher on Wednesday, December 19, 2012, with the MSCI Asia Pacific Index rallied 1.1%, registering second day of straight gain, on hopes that US policymakers will reach a deal to avert the fiscal cliff. Investors took heart from fresh signs of progress on a compromise solution to avert the fiscal cliff of tax hikes and spending cuts due to take place next year.

In order to break the deadlock of the fiscal cliff issue, U.S. President Barack Obama took the initiative in pulling up the threshold on the wealthiest Americans that would be charged higher tax rates, to $400,000 annual income, comparing with prior proposal of $250,000. That's still way of Republican House Speaker Boehner's request of $1m. But that was viewed as a significant step in narrowing the differences between the parties in negotiation. Also, Obama, lowered his demand on increase in tax revenue to by $1.2 trillion over 10 years, $200b lower than his prior proposal. That compared to Boehner's request of $1 trillion.

 

Meanwhile positive set of economic figures from the US bolstered risk sentiments as well. The National Association of Home Builders said its NAHB/Wells Fargo Housing Market index of home builder sentiment jumped to 47 this month from a revised 45 last month. The December reading is the best since April 2006, but readings below 50 indicate a majority of builders hold an unfavorable outlook.

Buying activities speedup further after S&P restored Greece's sovereign credit rating to B- with a stable outlook from previous selected default and confidence on the outlook for China's growth. S&P move came after Greece completed a debt buyback programme and euro zone finance ministers approved the latest batch of bailout cash.

In the Asia pacific, almost all regional shares indices ended solidly higher today, exception being China and Indonesia. Key benchmark indices on Australia, New Zealand, Japan, Taiwan, Hong Kong, Singapore, and India gained in-between 0.06% to 2.4%. China market little changed while Indonesia index fell 0.6%. South Korean market was closed for the country's presidential election.

Back to country wise- Tokyo shares skyrocketed on Wednesday, sending the benchmark Nikkei Stock Average 237.39 points higher from prior day to 10,160.40, a level not seen since March 28, 2012, when index closed at 10,182.57, with shares almost across the board enjoying healthy gain amid optimism the Bank of Japan will opt for further monetary stimulus when it concludes a two-day policy meeting tomorrow. Investor appetite for cyclical assets received strength on yen's continuing downtrend and expectations of new economic measures due to the change in government. Liberal Democratic Party President Shinzo Abe revealed the party's plan to swiftly strike a policy accord with the Bank of Japan to achieve 2% price growth, raising expectations of further monetary easing steps.

Japanese banks & financial firms were sharp higher after Deutsche Bank upgraded the sector to overweight from marketweight, citing expected yield-curve movements after Sunday's leadership election, which saw the opposition Liberal Democratic Party sweep to a landslide victory. Mitsubishi UFJ Financial Group surged 6.1% to 435 yen and Mizuho Financial Group Inc 4.3% to 147 yen. Nomura Holdings Inc increased 4.7% to 420 yen and Matsui Securities Co 3.1% to 692 yen. Ricoh Co surged 9.1% to 971 yen.

Tokyo insurers were up on expectations of policy moves to bring an end to deflation will likely send risk premiums lower and very long-term interest rates higher. Dai-ichi Life Insurance Co surged 9.1% to 113,200 yen, Tokio Marine Holdings Inc 4.9% to 2,337 yen, MS&AD Insurance Group Holdings Inc 7.1% to 1,651 yen, NKSJ Holdings 6% to 1,863 yen, and T&D Holdings Inc 4.7% to 991 yen.

On the economic news in Tokyo, the Ministry of Finance said that the Japan's posted its fifth straight trade deficit in November, with balance of trade in goods came to 953.4 billion yen during November, up 37.9% from a year earlier. Exports fell 4.1% on year in November to 4.984 trillion yen, while imports increased 0.8% on year in November to 5.937 trillion yen.

Department store sales in Japan rose 2.2% on year in November, marking the first rise in seven months after -2.4% in October, as low temperatures boosted demand for winter clothing while cosmetics and luxury goods sales were strong, data released by the Japan Department Stores Association showed on Tuesday.

Australia's shares finished at its highest level for the year with investors betting on US policymakers to back a deal to avert $600 billion in federal tax hikes and spending cuts. The benchmark S&P/ASX200 index was 22.6 points higher at 4,617.8, while the broader All Ordinaries index was up 22.7 points at 4,633.2. Most indices finished with gains, with miners led rally on stronger iron ore price. Rio Tinto closed 1.6% higher at A$65.71, BHP Billiton jumped 1.1% at A$37.06 and Fortescue Metals lifted 1.3% to A$4.66.

Surfwear retailer Billabong plummeted 13.3% to A$0.85 after slashing its earnings forecast and announced it was considering its fifth - and lowest - takeover offer in 10 months.

Whitehaven Coal surged 8.1% to A$3.38 after announcing it had held talks with China's largest coal company, Shenhua Group, but no offers were currently on the table.

New Zealand shares solidly higher, pushing the NZX 50 Index 43.75 points, or 1.1%, higher at 4023, as investors cheered SkyCity Entertainment Group's Adelaide expansion and broadly stronger offshore equity markets.

SkyCity closed 4.7% higher at NZ$3.79 in the New Zealand after the hotel and casino company said it will spend more than $A300 million redeveloping its Adelaide Casino following two-and-a-half years of negotiations with the state government over the size of the operation, exclusivity and taxes.

Mainland China shares ended lackluster trading in diverse terrain after swung between gains and losses on Wednesday, December 19, 2012, with the benchmark Shanghai Composite index was down 0.23 point from prior day closure to finish at 2,162.24. Profit-taking took toll following sharp recent gains and a liquidity crunch at the year-end. Local market rallied more than 200 points or 10% after hitting 47-month low on December 3, 2012. Worries about liquidity pressure renewed as non-tradable shares worth of 78.6 billion yuan will be unlocked this week, marking the biggest weekly infusion this year.

Chinese resources players went lower on profit taking. Jiangxi Copper declined 1% to 22.63 yuan and Aluminum Corp of China 0.6% to 5.11 yuan. Inner Mongolian Baotou Steel Union Co slumped 1% to 5.23 yuan and nner Mongolia Baotou Steel Rare-Earth Hi-Tech Co dropped 1.1% to 35.79 yuan. Shares of Chinese distilleries were higher, led by Kweichow Moutai Co, the biggest maker of baijiu liquor, rose 2.3% to 219.45 yuan, extending gains for a fourth day, on speculation its parent may steadily raise its stake in the company. Wuliangye Yibin Co. added 2.2% to 27.79 yuan

Hong Kong market closed higher for the first time in three days on Wednesday, December 19, 2012, on tracking positive lead from US and other regional markets amid optimism over the fiscal cliff negotiations. The benchmark Hang Seng Index advanced 128.64 points to stand at 22,623.37. Hang Seng China Enterprises Index rose 86.68 points to 11,388.40.

China Shenhua Energy Co. climbed up 3.2% to HK$33.65 after a report that Chinese coal firm given full takeover bid for Sydney-listed Whitehaven Coal. BOCOM International upgraded its rating on Shenhua to Long-term Buy from Neutral.

Esprit Holdings tumbled 4.5% to HK$11.16 after Group expected to record a loss for the half-year ended Dec 31 2012, mainly attributable to worse than expected operating results for the period after the Group's unaudited first quarter results for the three months ended 30 September 2012.

The Indonesia stocks ended lower today, with the Jakarta Composite Index down by 25.58 points to 4,275.86, dragged by coal players inline with fall in coal prices after IEA warning of gloomy outlook for US coal industry. The benchmark index's decliners outnumbered advancing stocks by nearly two-to-one, 177 to 90.

Indian shares were up for second day in row, sending the barometer index, BSE Sensex, 0.57% higher at 19,476, on sustained buying by funds and retail investors on optimism of RBI easing monetary policy next month and amid a firming global trend. Barring FMCG and capital goods, all other BSE sectoral indices were in the green.

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