Asian shares soared in Thursday's trading, led by Hong Kong and Shanghai, on expectations of a Federal Reserve rate cut and after new domestic tax laws were announced for 2008 in China.
The Hang Seng jumped 1,111 points, or 4.06%, to 28,482, while the Shanghai Composite Index rose similarly, by 4.2%, or 199 points, to 5,003, passing the psychologically crucial 5,000-point benchmark for the first time this week.
In Japan, the Nikkei climbed 360 points, or 2.4%, to 15,513, although the index still remains in negative territory for the year by 3%. The Korean Kospi gained too, by 43 points, or 2.34%, to 1,877.
Hong Kong's biggest movers were in telecoms and insurance companies.
surged 8.52% to HK$16.82, while
soared 7.95% to HK$24.45.
rose 4.2% to HK$140, and
gained 3.81% to HK$6.26.
leapt 6.7%, to HK$83.20, after announcing that it would pay 1.8 billion euros, or $2.7 billion, for a 4.18% stake in Belgian banker
. As part of the deal, Ping An's president Louis Cheung will also become a nonexecutive director of the bank.
China Life Insurance
bounced 6.26% to HK$42.45.
The deal follows a similar sale of a stake in U.S. bank
to Abu Dhabi's government for $7.5 billion, announced on Tuesday.
Among property stocks,
Sun Hung Kai Properties
climbed 5.25% to HK$10.42, while
rose 4.2% to HK$90.50, and
Cheung Kong Holdings
added 2.9% to HK$143.90. A Federal Reserve rate cut would benefit Hong Kong property developers, and many expect these stocks to appreciate further in December.
In China, commodity stocks also rose.
Sinopec Shanghai Petrochemical
jumped 5% to 15.50 yuan, while
"A" shares came off their lows for the year, reached Wednesday, rebounding 2.8% to 33.05 yuan.
Aluminum Corp. of China
climbed 3.3% to 38.90 yuan.
New tax laws which will make China more competitive for domestic companies, and less so for foreign ones, sent "A" shares surging. The laws, which will take effect on Jan 1, stipulate that both Chinese and foreign companies will pay a maximum tax of 25%. Right now, Chinese companies pay in excess of 30%, while foreign companies enjoy rates as low as 13%.
The yuan was stronger vs. the dollar, at 7.3826 vs. 7.3952, although still down one the week. After recent gains in the currency, Beijing has been increasingly cautious in public about letting the currency rise further. Some say this caution may also be reflected in their attitude to global investing, too.
"The investment in
a few months ago has lost about a third of its value, translating to a mark-to-market loss of about $1 billion, and it's quite likely that the upshot of this is that China will adopt a lower-risk approach to investing after this lesson," says Adrian Foster, head of capital markets for Dresdner Kleinwort in Beijing. "What looks funky today can look much less so in a relatively short period of time."
Foster adds that the "rising importance" of China's cash stockpiles will be supportive of "yield-generating assets", such as the yen carry trade, where investors use Japanese debt to finance returns in high-yield overseas fixed income markets.
In Japan, the yen was trading weaker, at 110.10 vs. the dollar, down from the early morning price of 109.93.
Exporters gained on the weaker currency.
rose 1.68%, to 6,040 yen, while
, which is broadly viewed in Asia as a value stock right now, gained 3.2% to 5,860 yen, and
climbed 5%, to 65,300 yen.
Industrial production rose the highest in a year, up 4.7% vs. analysts' expectations of 4.2%. On Friday, Japan releases inflation and jobs data, and many expect that to provide an indication of how soon the Bank of Japan will raise interest rates. An interest rate hike would be a plus for the yen, but could also be negative for equities in the near term as carry-trade positions are unwound by hedge funds.
"There's enough statements from BoJ officials that they are uncomfortable with policy rates so low at 0.5%, and they are also aware of the impact on global liquidity and heightened market volatility resulting partly from these low rates," says Dresdner Kleinwort's Foster.
"It looks sensible to me that we should factor in a rate hike now in the first quarter of next year," he adds.
Markets in India were more subdued than other Asian indices, with the Bombay Sensitive Index ending up 0.34% to 19,003.
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
. He lives in New York.