Asian Markets Remain Volatile

Hon Kong's Hang Seng is up, the Shanghai Composite is down.
By Daniel M. Harrison ,

Volatility continued to play on markets in Asia Tuesday, as property plays and mainland Chinese companies leapt ahead in Hong Kong, while stocks in Shanghai plunged to an 11-month low.

In Hong Kong, the Hang Seng rose 288 points, or 1.3%, to 23,137.46, while in China, the Shanghai Composite Index dropped 143 points, or 4.1%, to 3329.54. In Japan, the Nikkei gained 130 points, or 1%, to 12,656.41, as a weaker yen provided renewed strength to exporters.

Traders are noticeably more optimistic about the prospects for the second quarter in Hong Kong than they were about the first quarter back in January. "The second quarter is likely to remain volatile but can hopefully fair better after all the actions taken by the U.S. and Europe to avert a financial crisis," says Steven Wong, a trader for Daiwa Bank in Hong Kong.

On dealing floors in Hong Kong, it was rumored that Beijing officials will step in and stabilize Shanghai's exchange if the market sells off to 3,000 points. Officials will slash the stamp duty, a form of tax levied on share purchases, if that trigger is reached, according to the rumors.

A-share commodity heavyweights

PetroChina

(PTR) - Get Report

,

Sinopec Shanghai Petrochemical

(SHI) - Get Report

and

Aluminum Corp. of China

(ACH) - Get Report

all sold off heavily in Shanghai, hit by domestic selling and by a weaker oil price, which was around $100.16 a barrel in the Singapore afternoon.

In Shanghai, PetroChina dropped 2.3%, to 16.83 yuan, and Sinopec Shanghai fell 5%, to 9.35 yuan. Aluminum Corp. of China plunged 7.7%, to 18.79 yuan. Hong Kong-listed H-shares were performing better, however. PetroChina rose 1.2%, to HK$9.8, and Sinopec Shanghai lost 0.4%, to HK$2.67. Aluminum Corp. of China leapt 2.2%, to HK$12.86. Traders cited heavy sellers in

CNOOC

(CEO) - Get Report

, unchanged at HK$11.50.

The disparity between Chinese and Hong Kong-listed shares is likely to benefit most ADRs, since most of the New York listed receipts are for shares on the island as opposed to those listed in Shanghai. ADRs can also benefit from a reduction in the A-H share premium, the difference in value between mainland and Hong Kong-listed shares.

Property companies were staging a rebound, helping the Hang Seng to recover recent losses.

Cheung Kong

(CHEUY)

, Hong Kong's largest property developer, rose 2.5%, to HK$113.30, and conglomerate

Hutchison

(HUWHY)

rose 1.6%, to HK$74.85.

In Japan, sentiment was spurred as the yen weakened through the 100 yen mark, to around 100.16 yen. (The yen was also substantially weaker in the New York trading session, at 101.76, indicating a higher open for Japanese shares Wednesday).

Canon

(CAJ) - Get Report

gained 2.4%, to 4700 yen, and

Nintendo

(NTDOY)

jumped by the same percentage, to 52,100 yen.

Among financials,

Sumitomo Mitsui Financial

( SMFJY) gained 2.8%, to 552 yen, and

Kookmin Bank

(KB) - Get Report

surged 4.3%, to 57,800. Traders say they expect to see a big uplift in Kookmin Bank if U.S. markets hold up over the coming week.

In other regional news, it was rumored during the Asian afternoon that Malaysian Prime Minister Abdullah Ahmad Badawi had resigned. Most recently,

Bloomberg

was reporting that former leader Mahathir Mohamed had called an emergency meeting to ask for his departure after a weak election turnout. The instability, coupled with weaker energy prices, may weigh on the

iShares Malaysia Free Index

(EWM) - Get Report

during the week.

Other Asian markets were mostly down slightly. The South Korean Kospi fell 0.1%, to 1702, and the Taiwanese Taiex lost 1.8%, to 8419. India's Bombay Sensitive Index fell 0.1%, to 15,626.

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

Daniel M. Harrison is a business journalist specialising in European and emerging markets, in particular Asia. He has an MBA from BI, Norway and a blog at

www.theglobalperspective.biz

. He lives in New York.

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