Markets in Asia continued to rise Monday, with Hong Kong and Korea both surging into record territory.

The Hang Seng soared 1,181 points, or 3.89%, to 31,586, while the Korean Kospi closed up 35 points, or 1.72%, to 2,062.92. In China, the Shanghai Composite Index advanced 158 points, or 2.83%, to 5,748.

"The market is strong partly because of U.S. markets. We're all expecting a lower interest rate this week," says Conita Hung, head of equities for Delta Financial in Hong Kong.

In Hong Kong, telecoms led the big gains after China Unicom's ( CHU) announcement on Friday that the company increased its profit in the first nine months of the year to 5.11 billion yuan, or $684 million, from 4.19 billion yuan, or $560 million a year earlier. Shares in China Unicom rose 8% to a 52-week high of HK$18.38.

China Mobile ( CHL) gained 3.05% to HK$158.90, while China Netcom ( CN) jumped 4.71% to HK$24.45 and China Telecom ( CHA) rose 5.6% to HK$6.79.

Shares in China Life Insurance ( LFC) also staged a rally to record highs, rising 1.07% to HK$52 in Hong Kong and 6.72% to 75.08 yuan in Shanghai. On the mainland, that gives China Life Insurance a market value of 2.12 trillion yuan, or $284 billion, making it larger than AT&T ( T) and giving China now five of the 10 largest companies in the world.

The jump by a Chinese company into the leader board continues a trend set by PetroChina ( PTR) only two weeks ago, when the company surpassed GE ( GE) in market value.

PetroChina shares also hit a 52-week high, bouncing 3.15% to HK$19.62 on news that the company had raised $8.9 billion for its Nov. 5 Shanghai listing. It will also be added to the Hang Seng along with Shenhua Energy on Nov. 7, taking the total number of companies on the index to 42.

The big jump in the blue-chip Chinese shares is good news for the iShares FTSE Xinhua ( FXI) ETF, which has a total weighting of 27% spread across China Mobile, China Life Insurance and PetroChina.

The Chinese yuan reached an all-time high against the U.S. dollar, climbing to 7.47 yuan from 7.5 on Friday amid strong gains in equity prices. Shares in China were also helped by a rumor that Beijing may make index futures available to investors soon.

Investors in China opened 7.26 million stock trading accounts in September, down from 8.92 million in August but still well above July's 4.02 million new account openings, taking total accounts to 126.04 million.

That leaves another 1.2 billion people still inactive in the market, says Adrian Foster, head of capital markets for Dresdner Kleinwort in Beijing.

"Let's assume that toddlers and geriatrics have no interest in such stock-trading activities, and that 500 million rural peasants similarly have no interest and no money. There's still a few hundred million urban Chinese people without such an account," says Foster.

"Just as with the currency reform being half done, so too the move to a stakeholder economy can be described as a work in progress."

In Korea, Kookmin ( KB) was up 4% to 77,400 won, while steelmaker Posco ( PKX) showed no signs of abating after last week's big gains, ending the day up 2.9% to 677,000 won.

In Japan, the Nikkei gained 192 points, or 1.17%, to 16,698.08, still leaving the index shy of this month's 17,000 benchmark. The Topix rose 32 points, or 2%, to 1606 points.

Shares in Nintendo ( NTDOY) jumped 4.6% to 3,100 yen on news that the company will start selling the Wii in China and South Korea next year.

Other exporters saw strong gains on the back of a weakening yen. The dollar was buying 114.23 yen in Asian trading, up from a low of 114 vs. the dollar on Friday.

Sony ( SNE) jumped 2.9% to 5,720 yen, while Canon ( CAJ) soared 5.3% to 1.891 yen, and Nissan ( NSANY) surged 14% to 1,283 yen, its biggest jump in six years. The automobile maker said its operating profit for the year was up 12% to 218.7 billion yen, or $1.9 billion.

Japanese retail sales unexpectedly rose 0.5% last month, beating an anticipated decline of 0.7% after domestic shoppers appeared undeterred by seasonal typhoons. Most analysts expect the Bank of Japan to keep interest rates on hold when it meets next, but an increase of 25 basis points is seen for early 2008.

"It's not only Hong Kong that's great today, but Asian markets as a whole are performing well as there is increasing liquidity inflow to the equity market rather than to other markets such as bonds," says Delta Financial's Hung.

"We expect it to be volatile, but with an uptrend maintained," she adds.
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.