Rate-Cut Hopes Lift Asia

Asian markets followed Wall Street's lead and rebounded a bit Tuesday amid expectations of a half-point interest rate cut in the U.S.

Japan's Nikkei was the biggest gainer, rising 390 points, or 3%, to 13,478, while the Hang Seng gained 238 points, or 1%, to 24,298. The Shanghai Composite Index was also up, by 38 points, or 0.9%, to 4457, after snowstorms Monday stalled the market.

However, in a pattern consistent with the performance so far this year, volumes were low on the buying. On the Hang Seng, market turnover was HK$92.6 billion vs. HK$107.8 billion when the index sold off 4.3%.

"Performance in Asia is up a little today, although people feel hesitant to commit before [the Federal Open Market Committee] meeting," says Tat Auyeung, who manages $600 million for Apex Capital in Hong Kong. "A 50-basis-point interest rate cut should provide some relief in the short term."

In Japan, exporters led most of the buying, even as the yen rose against the dollar to 106.69 from 106.90 previously. Nintendo(NTDOY Quote - Cramer on NTDOY - Stock Picks) jumped 5.4% to 49,550 yen, while Sony(SNE Quote - Cramer on SNE - Stock Picks) added 4.5% to 5,100 yen, and Canon(CAJ Quote - Cramer on CAJ - Stock Picks) rose 3.5% to 4,780 yen.

Megabanks also fared well ahead of the expected cut in interest rates stateside. Mitsubishi UFJ(MTU Quote - Cramer on MTU - Stock Picks) was 4.6% higher, to 1,030 yen, and Sumitomo Mitsui Financial(SMFJY Quote - Cramer on SMFJY - Stock Picks) gained 3.2% to 623 yen.

In Hong Kong, gains were more modest but telecoms saw most of the buying action. China Unicom(CHU Quote - Cramer on CHU - Stock Picks) jumped 2.9% to HK$17.70, while China Netcom(CN Quote - Cramer on CN - Stock Picks) advanced by the same percentage to HK$24.60. China Mobile(CHL Quote - Cramer on CHL - Stock Picks) rose 0.7% to HK$117.90, and China Telecom(CHA Quote - Cramer on CHA - Stock Picks) gained 1.1% to HK$5.68.

Property stocks and financials were also higher, since heavy U.S. interest rate cuts helps these companies most. Cheung Kong(CHEUY Quote - Cramer on CHEUY - Stock Picks) added 2% to HK$127.70, and Hang Seng Bank(HSNGY Quote - Cramer on HSNGY - Stock Picks) rose 2.4% to HK$154.30. HSBC Holdings(HBC Quote - Cramer on HBC - Stock Picks) increased 0.9% to HK$117.60.

Chinese banks Industrial & Commercial Bank of China(IDCBF Quote - Cramer on IDCBF - Stock Picks) and Bank of China(BACHF Quote - Cramer on BACHF - Stock Picks) (Hong Kong) announced that they have to make a larger provision than previously thought from subprime exposure.

Industrial & Commercial fell 0.6% to HK$4.89, and Bank of China was 0.3% lower at HK$3.33.

Auyeung says that banks and properties may gain the most from a rebound in the Hang Seng, which he expects in the next few weeks. However, other dealers also point out that comparisons between today and 1997 point to a sharp decline in the index after such a rebound.

"If the Fed cuts by 50 basis points that will support the market, but don't expect a major push," says Conita Hung, head of equities for Delta Asia Finance. "If it cuts just 25 points then there will be major selling pressure." Hung adds that support for the index is now around 23,500, with the next level at 22,300.

The price of gold suffered profit-taking from Asian speculators, but was hitting a new all-time high of $934.80 an ounce by the end of trading as economic uncertainty continued to fuel demand for the metal.

Gold miners were mixed in Hong Kong trading, mostly showing modest gains. Zhaojin Mining(ZHAOF Quote - Cramer on ZHAOF - Stock Picks) rose 1% to HK$34.54, and Zijin Mining(ZIJMF Quote - Cramer on ZIJMF - Stock Picks) added 1.3% to HK$10.08. Sino Gold(SIOGF Quote - Cramer on SIOGF - Stock Picks) lost 1% to HK$54.50.

Technology shares were sluggish. Alibaba.com(ALBCF Quote - Cramer on ALBCF - Stock Picks) rose 0.5% to HK$20.30, while Baidu.com(BIDU Quote - Cramer on BIDU - Stock Picks) ADRs were down 1.8% to 198.99 euros in Frankfurt trading during the morning. Sina(SINA Quote - Cramer on SINA - Stock Picks) ADRs were faring similarly, off 4% at 29.87 euros.

In other news in Hong Kong, Jiangxi Copper(JIXAY Quote - Cramer on JIXAY - Stock Picks) obtained permission from shareholders of Northern Peru Copper(NPUCF Quote - Cramer on NPUCF - Stock Picks) for a $435 million buyout, while fertilizer producer Sinofert(SNFRF Quote - Cramer on SNFRF - Stock Picks) acquired 75% of Shandong Deqilong Chemicals.

Shares in Jiangxi Copper fell 0.5% to HK$15.30, while Sinofert leaped 4.2% to HK$6.51.

On the Chinese mainland, snowstorms continued to drag on, and local weather authorities now say they are expected to last another 10 days. Auyeung points out that the market will show resilience to the storms, but that inflation may increase as a result. Financial losses caused by the snowstorm total around $2.5 billion.

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