After a deeply bearish start to the week, Asian indices ended on a high note Friday, as sentiment in Hong Kong over the U.S. economic stimulus proposals, coupled with a weakening yen in Japan, propelled stocks to a regional rally.
The Hang Seng bounced to within just 80 points of last week's closing level, soaring 1,583 points, or 6.7%, to 25,122. The Shanghai Composite Index regained strength off early weakness to close up 44 points, or 0.93%, at 4761.
In Japan, the Nikkei rose 536 points, or 4.1%, to 13,629, as the yen slipped nearly 2%, to 107.61 vs. the dollar.
"We are back on an uptrend," says Jackson Wong, investment manager at Tanrich Securities in Hong Kong. "We are on a technical rebound since selling off so much last week, where we were oversold exactly 2,000 points on the Hang Seng."
Wong adds that the support level for the Hang Seng is now 24,000, with an upper resistance level of 26,000.
Leading the gainers were Chinese consumer plays after China's Vice Premier Zeng Peiyang said that stimulating domestic consumption would be a top priority for Beijing in 2008.
"The focus of our efforts will be shifted from relying mainly on investment and export to stimulating consumption and steadily increasing the consumption rate," Zeng announced at the World Economic Forum Thursday, according to the state-owned newswire
Xinhua.
Zeng's comments sent shares of insurers, airlines and Olympic-theme stocks surging. In Hong Kong,
China Life Insurance(LFC Quote - Cramer on LFC - Stock Picks) leaped 8.6% to HK$33.50, while rival
Ping An(PIAIF Quote - Cramer on PIAIF - Stock Picks) jumped 9% to HK$68.20.
Despite doubts expressed by some this week that a proposed 140 billion yuan ($19.4 billion) share sale in Ping An to fund acquisitions may be rejected by regulators, the company maintained its intention to go ahead with its capital-raising plans.
Air China(AIRYY Quote - Cramer on AIRYY - Stock Picks) rose 11% to HK$7.86, while
China Eastern Airlines(CEA Quote - Cramer on CEA - Stock Picks) jumped 10.7% to HK$5.61.
Cathay Pacific(CPCAY Quote - Cramer on CPCAY - Stock Picks) was up 3.7% to HK$18.08.
In Shanghai, sportswear maker
Li Ning(LNNGF Quote - Cramer on LNNGF - Stock Picks) rose 1%, to 25.55 yuan.
Dot-com stocks feeding Chinese consumption were also doing well.
Alibaba.com(ALBCF Quote - Cramer on ALBCF - Stock Picks) soared 12.8% to HK$21.40 in Hong Kong, while ADRs in
Baidu.com(BIDU Quote - Cramer on BIDU - Stock Picks) were gaining 9.9% in Frankfurt.
"Dot-com stocks mirror the Nasdaq, as well as the Chinese economy, so there has been a strong rebound," says Wong.
Among commodity stocks, gold miners soared as the price of the metal hit a record $920 an ounce in Asian trading.
Zijin Mining(ZIJMF Quote - Cramer on ZIJMF - Stock Picks) advanced 9.2% to HK$10.30, and
Zhaojin Mining(ZHAOF Quote - Cramer on ZHAOF - Stock Picks) gained 7.2% to HK$34.95.
Sino Gold(SIOGF Quote - Cramer on SIOGF - Stock Picks) rose 8.9% to HK$53.60.
PetroChina(PTR Quote - Cramer on PTR - Stock Picks) surged 8.6% to HK$11.88, while the shares in Shanghai closed up 0.5% at 26.14 yuan. Also in Shanghai,
Aluminum Corp. of China(ACH Quote - Cramer on ACH - Stock Picks) advanced 2.5% to 33.44 yuan.
Dealers said that hedge funds were using the bumps to unload positions in
Hang Seng H-Share (HSXUF Quote - Cramer on HSXUF - Stock Picks), an ETF similar to the
iShares FTSE Xinhua(FXI Quote - Cramer on FXI - Stock Picks). Hang Seng H-Share gained 9.2% to HK$141.80.
In Japan, official data showed that inflation doubled in 2007, by 0.8%, its highest in nine years. Central bank Governor Toshihiko Fukui said the price increases were mostly seen in gasoline and commodities.
The reports now lead many to believe that the Bank of Japan will not raise interest rates any time soon, as previously expected. That would be a plus for exporters, which depend on a weak yen to extract bigger margins.
"A rate cut is unlikely as the Japanese economy is expected to grow at a pace near the potential growth of the economy in 2008," writes Citigroup analyst Kiichi Murashima in Tokyo, in a research report. Murashima cautions, however, that Japan's export growth will "inevitably" slow in the same period, due to a U.S. slowdown.
Daniel M. Harrison
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