An 8% surge in Chinese mainland equities helped Asian markets have a bullish start to the week Monday, as all the major indices followed the country's largest one-day surge since April 2005.
The Shanghai Composite Index leaped 351 points to 4672, while the Hang Seng jumped 908 points, or 3.8%, to 25,032, making a close above the psychologically crucial 25,000 level for the first time in a week. In Japan, the Nikkei rose 362 points, or 2.7%, to 13,859.
"The market is so sold-off, especially for China, and emerging market volatility is very, very high," says Kit Wong, an analyst for Harris-Fraser in Hong Kong. "The fundamentals are still very good, and this recent technical correction is not a problem for long-term investors. There have been no fundamental changes."
Chinese shares rose after reports that the local securities regulator has approved two new closed-end mutual funds, which are rumored to be raising up to 14 billion yuan ($1.9 billion) for investment in domestic equities.
Leading the charge on the mainland was
Aluminum Corp. of China
, which soared the maximum daily limit allowed of 10%, to 32.34 yuan, after an announcement Friday that the company and
paid $14 billion for a 12% stake in miner
.China's sovereign wealth fund
China Investment Corp.
has now agreed to provide up to $120 billion if the company seeks a full acquisition.
China Investment also announced that it may team up with state-owned
China Shenhua Energy
to make a bid for around 16% of Australian iron ore giant
in a deal worth around $2 billion.
Shares in China Shenhua added 8.6% to 61.62 yuan. Other commodity giants followed in the big gains.
surged 8.1% to 26.39 yuan, while
Sinopec Shanghai Petrochemical
gained 5% to 13.02 yuan, after losing as much as 7% of its value last week in snowstorm jitters.
Financials on the mainland also powered ahead.
Bank of China
rose 6.9% to 5.71 yuan, and
Industrial & Commercial Bank of China
jumped 7.4% to 7.23 yuan.
In Hong Kong trading, coal producers
rose as reports of supply disruptions in China, South Africa and Australia sent prices higher. Yanzhou Coal was 7% higher at HK$14.26, while China Coal rose 6.4%, to HK$19.60.
Mainland insurance stocks got an uplift after reports of damage caused by the snowstorm last week are now said to have been exaggerated.
climbed 11.7% to HK$62.30, while
China Life Insurance
advanced 9.3% to HK$32.25. Dealers said that they may become heavy buyers of China Life in the event of a further 5% decline in the price of stock this week.
Telcos also saw gains.
rose 4.9% to HK$123.40, and
ended 3.6% higher at HK$6.03.
( ALBCF) soared 13.6% to HK$20.35, following
on Friday, since Yahoo! owns a stake in the Chinese company.
Although many dealers are still wary of Chinese tech shares, some anticipate further rises if more positive news in the sector appears in the U.S. On Friday,
failed to catch the sector's momentum, and rumors circulated that investors may use the 3.7% losses as a buying excuse following China's gains.
Not all market participants are convinced of the bullish longevity of mainland shares, however. Sean Darby, head of strategy for Nomura in Hong Kong, says that the Fed's deep cutting may have negative side effects on mainland Chinese shares, while having the reverse effect on shares in Hong Kong.
"The absence of coordinated easing will hamper Asian equity rallies. Last week's 50 basis point
rate cut to 3% will create substantial policy problems for China as interest rate differentials narrow, adding pressure on the renminbi to appreciate," Darby wrote in a research note.
Darby recommends buying an inflation-protected basket of stocks, including plays like
and Japanese precious metals producer
In Japan, shares in
also rose as a result of the Microsoft bid, since the company is one-third-owned by the U.S. company. Yahoo! Japan rose 9.5% to 46,000 yen.
Other exporters gained mildly after the yen weakened to 106.96 against the dollar from 106.49 previously.
inched up 0.6% to 4,820 yen, and
added 0.7% to 4,620 yen.
gained 4% to 363 yen.
Other Asian markets followed in the buying. In India, the Bombay Sensitive Index rose 417 points, or 2.3%, to 18,660. The South Korean Kospi finished 56 points, or 3.4% higher, at 1690, and in Taiwan the Taiex gained 152 points, or 2%, to 7673.
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.