Political uncertainty around the Chinese Party Congress and the hospitalization of King Bhumibol of Thailand caused a choppy start in Asian markets Monday. However, momentum from big corporate announcements saw the major Chinese indices end way into the green, prompted by another round of IPO fever.Chinese exchanges ended the day at record highs, with the Hang Seng up 702 points, or 2.44%, to 29,540, and the Shanghai Composite Index finishing up 126.82 points, or 2.15%, breaking the benchmark 6,000 for the first time to 6,030. Nearby, the Kospi Composite was up 0.44% to 2035.39. Japanese trading was mixed, with the broader Nikkei 225 up 27 points, or 0.16% to 17,358.15, while the Topix slipped 2% to 1657. "Overall, Chinese companies continue to experience strong financial conditions and an export surplus, so there's a lot of excess liquidity in the markets right now, keeping prices high," says Kenta Inoue, economist for Mitsubishi UFJ Securities in Tokyo. PetroChina ( PTR) said that its oil and gas output was up 4.3% this month, while also saying it would pursue a listing on the mainland this quarter. The company hopes to raise $7 billion to $8 billion, which will be China's largest IPO to date. The news sent its shares in Hong Kong soaring 13.01%, making PetroChina the second-largest company in the world by market cap, at HK$3.51 trillion, or $452.4 billion. The company overtook GE ( GE), which has a market cap of $420.4 billion. Exxon Mobil ( XOM) remains still the world's largest company at $518.5 billion.
Alibaba.com, China's largest e-commerce provider, said it is looking to raise $1.3 billion in a Hong Kong IPO later this year. That's good news for Yahoo! ( YHOO), which holds a 39% stake and that was rumored to be taking a big stake in the IPO. Japanese exporters rose on stronger-than-expected U.S. retail data but pulled back at the end of the day. After rising, Canon ( CAJ) and NTT Docomo ( DCM) both shed between 0.16% and 1.2% respectively, but Sony ( SNE) survived marginally up by 0.18% to 5.540 yen. The yen was trading weaker at 17.71 vs. the dollar on the U.S. retail news, but Mitsubishi's Inoue says that Japanese exporters have a wide margin of yen strength until they will feel the pain. "Even 110 yen vs. dollar will still be profitable for them because the break-even point is around 105, so there is a lot of room for profitably," he says. In telecoms, China Mobile ( CHL) surged 5.84% to a record 141.40, while China Unicom ( CHU) jumped 3.34% to 16.10 and China Telecom ( CHA) rose 5.56% to 7.22 in Hong Kong trading. Among U.S.-traded ETFs, the gains in PetroChina and China Mobile will be good news for the iShares FTSE/Xinhua ( FXI), which is weighted 18% in both companies. The iShares MSCI Hong Kong ( EWH) may also see gains. The ETF is weighted nearly 25% in Hutchison Whampoa ( HUWHY), Cheung Kong ( CHEUY) and Sun Hung Kai Properties ( SUHJY), which closed up to 2.2% higher on the Hong Kong's sixth annual state land auction today.
For the eighth time this year, China's central bank increased the reserve-requirement ratio, the amount of money banks have to hold on deposit with the central bank, by 0.5% to 13% on the back of a leap in the trade surplus to $1.34 trillion. Still, the record-setting gains in Asia took most traders by surprise, since most expected regional political headlines to dominate markets. Today was the start of the weeklong 17th Chinese Party Congress, which is held every five years and is usually a negative for domestic markets. In addition, King Bhumibol of Thailand was taken into hospital Saturday, creating fears he may be unable to continue providing political stability as the country elects its first democratic government in more than a year in December. In the first day of the congress, Premier Wen Jiaobao described "an imbalance in development between urban and rural areas," and conceded that China's "economic growth is realized at an excessively high cost to resources and the environment." "China will rely less on exports and capital spending to drive growth," he predicted. "All pretty realistic assessments," says Adrian Foster, head of capital markets for Dresdner in Beijing. "But, as ever, detail is king, and we don't have much." On trading floors, there is still talk of holding off any significant trading in the country until the end of the week.