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Asia Stocks: Deal Boost

A strong rupee helped Indian stocks advance Monday as non-oil exporters sold dollar-based investments. Traders shook off concerns of foreign funds liquidating Indian stocks after a report showed investors abroad purchased $365.5 million worth of stock more than they sold for the previous week. India's benchmark Sensex Index closed up 301.50 points, or 1.74%, to 17,650.57.

M&A activity hit the Indian financial sector Monday. HDFC Bank (HDB) agreed to a share swap ratio of 1:29 for Centurion Bank of Punjab. "The merger will likely be dilutive to earnings in the 2009 fiscal year, but combining functions and economies of scale should drive returns on earnings and earnings per share accretion from the next year," said a Credit Suisse analyst in a note to clients. If the deal receives shareholder approval, it will be the largest merger in Indian banking history. ADR shares of HDB closed up 2.3% to $114.13.

Market rumors circled around Indian automarker Tata Motors (TTM) after Reuters reported a deal to buy Jaguar and Land Rover could be announced on March 5 or March 6. The deal is rumored to close between $1.5 billion and $2 billion for both luxury car brands. Shares of TTM closed up 2.3% at $18.12.

Indian ADR technology stocks posted strong gains on Monday. Infoys Technologies (INFY) finished up 1.5% to $42.13, Satyam Computer (SAY) closed up 3% to $26.61, Patni Computer Systems (PTI) traded up 2.3% to $13.13 and Wipro (WIT) closed up 2.7% at $12.07. Bucking the trend in the technology sector was online information provider Rediff.com (REDF). Shares of Rediff traded down 1.7% to $8.21.

Be sure to check out the Far East Portfolio at Stockpickr.com every night to find out which stocks in India and China are making big moves and announcing major news.

China Recap

China's leading stock exchanges were a house of pain for investors Monday, as speculation grew that an overabundance of newly tradable shares will flood the market in the near term.

In Hong Kong, the Hang Seng Index lost 35.9 points, or 0.2%, to 23,269.14 and China's Shanghai Composite dropped 177.75 points, or 4.1%, to 4,398.81. "China investors fear there will be more A-shares ready for sale," said Andrew Toh, head of sales and research at Tai Fook Securities in Hong Kong. The People's Bank of China also hurt liquidity and investor sentiment, after issuing a statement saying it'll force banks to raise their reserve ratio, slowing down capital available for loans.

One sector that continues to show strength in China is the online gaming space. Chinese online game company Perfect World (PWRD) surprised Wall Street Monday after the firm forecasted first-quarter revenue ahead of analysts' estimates due to strong growth from new and current games. The firm expects first-quarter revenue to come in at $38.7 million to $39.8 million, vs. analyst estimates of $32.1 million. American depositary receipt (ADR) shares soared 12% higher to close at $28.60 on 3 times average daily volume.

In technology land, Chinese handset design and software solution provider China Techfaith (CNTF) reported a 56% rise in fourth-quarter net revenue for 2007 at $45.7 million, vs. $29 million for the same period in 2006. The company raised first-quarter revenue guidance to $48 million to $49 million, vs. analyst estimates of $42.86 million. Techfaith said its solid performance was due to strong demand for high-end handsets and a healthy international market. Shares surged 11% in after-hours trading to $5.85.

Another Chinese ADR winner was agricultural solutions provider Agria (GRO). The company predicted that fourth-quarter revenue will come in at the high end of its previous guidance, and first-quarter 2008 revenue will be 15% higher than the first quarter of 2007, due to strong growth led by corn seed sales. Shares of GRO surged higher by 9% to $8.28 on twice the average daily volume.

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