HONG KONG -- Markets in Hong Kong and Japan rebounded in a sharp afternoon rally Thursday, as investors looked for bargains and sellers scrambled to cover short positions in blue chip "H" shares after the prior session's big dip.
The Hang Seng rose 664 points, or 2.7%, to 25,114, after bouncing off an intraday support level of 24,000. The Nikkei also fared well, jumping 278 points, or 2%, to 13,783 points after hitting a 26-month low Wednesday.
Mainland shares were still decliners, however. The Shanghai Composite Index fell 139 points, or 2.6%, to 5151, as traders mulled
Beijing's hike in the reserve requirement ratio.
"There was a fair bit of shorting into the fall by some of the trading houses. That's why today you see quite a big short-covering rally," says Khiem Do, who manages $17 billion for Baring's Asia Pacific Fund in Hong Kong.
In Hong Kong, short positions most notably being covered were
China Life Insurance(LFC Quote - Cramer on LFC - Stock Picks),
Hong Kong Exchanges(HKXCF Quote - Cramer on HKXCF - Stock Picks),
Esprit Holdings(ESHDF Quote - Cramer on ESHDF - Stock Picks) and
China Mobile(CHL Quote - Cramer on CHL - Stock Picks).
China Life Insurance jumped 6.1% to HK$35.50, while Hong Kong Exchanges rose 4.4% to HK$179.50, and Esprit Holdings soared 9.7% to HK$95.10. China Mobile gained 3.4% to HK$122.50.
Some market participants say Hong Kong Exchanges can reach HK$190 in the near term, while Esprit Holdings rallied strongly after falling through the HK$90 price target on Wednesday, which was set by short sellers late last week.
"Today's movements indicate a good technical sign that perhaps 24,000 points [on the Hang Seng] was a bottom in this correction," says Do.
Telecoms also had an upbeat day, as investors resumed speculation over mainland industry restructuring. Analysts at
Bank of China said in a research note today that
China Telecom(CHA Quote - Cramer on CHA - Stock Picks) would pay heavily for assets of
China Unicom(CHU Quote - Cramer on CHU - Stock Picks). The report predicted industry changes would take place after March.
Shares in China Unicom soared on the news, by 5% to HK$17.44, while China Telecom gained 4.3% to HK$6.37.
China Netcom(CN Quote - Cramer on CN - Stock Picks) surged 5.9% to HK$25.05.
Gold miners were off however, after a deep drop in the commodity price in New York trading. The price of gold was holding up, at $882.30 an ounce, by the end of Asian trading.
Zijin Mining(ZIJMF Quote - Cramer on ZIJMF - Stock Picks) lost 2.4% to HK$11.41, and
Zhaojin Mining(ZHAOF Quote - Cramer on ZHAOF - Stock Picks) tumbled 6.9% to HK$35.20.
Sino Gold(SIOGF Quote - Cramer on SIOGF - Stock Picks) gave back 5.5% to HK$52.
The drop in commodities was extended in the Shanghai selloff, where
PetroChina(PTR Quote - Cramer on PTR - Stock Picks) "A" shares lost 2%, to 29.04 yuan.
Aluminum Corp. of China(ACH Quote - Cramer on ACH - Stock Picks) sank 5.3% to 38.47 yuan.
In Japan, shares bounced following a week-long selloff. Leading gainers were exporters, which have been hit hard recently by a yen rally. The yen held steady at 107.08 after a steep climb Wednesday.
Kobe Steel(KBSTY Quote - Cramer on KBSTY - Stock Picks) advanced 4.6% to 341 yen, and
Honda(HMC Quote - Cramer on HMC - Stock Picks) gained 3.9% to 3220 yen.
Canon(CAJ Quote - Cramer on CAJ - Stock Picks) climbed 1.1%, to 480 yen.
Megabanks jumped after investors mulled what were perceived in Asia as a relatively benign set of data from the beige book.
Sumitomo Mitsui Financial(SMFJY Quote - Cramer on SMFJY - Stock Picks) was up 3.1% to 592 yen, while
Mitsubishi UFJ(MTU Quote - Cramer on MTU - Stock Picks) locked in a 2.1% gain for the day to 972 yen.
In particular, dealers said they thought that shares in
Sony(SNE Quote - Cramer on SNE - Stock Picks) and
Nintendo(NTDOY Quote - Cramer on NTDOY - Stock Picks) were oversold at current levels, and they anticipate strong buying once the Asian correction subsides. Sony rose 2.7% to 5,660 yen, in line with other exporters, but Nintendo slipped 1.5% to 53,200 yen.
Other Asian exchanges were mixed, as India and Taiwan followed China's lead, a trend which has been common so far in 2008. The Korean Kospi rose 18 points, or 1%, to 1723, while the Taiwanese Taiex lost 78 points, or 1%, to 8101. The Bombay Sensitive Index slid 167 points, or 0.8%, to 19,700.
"There is some evidence now that companies have been able to avoid some of the worst of the subprime scenario in the market," says Sean Darby, chief Asia strategist for Nomura Bank in Hong Kong. "We're coming on to being about two-thirds of the way through."
Daniel M. Harrison
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