Shares in Asia overcame news of higher-than-expected inflationary data in China and lower-than-expected liquidity data in Japan to finish higher Monday. Markets in Hong Kong were closed for a religious holiday.

The Japanese Nikkei finished 88 points, or 0.6% higher, at 13,743.36, and the Shanghai Composite Index rose 13 points, or 0.4%, at 3626.98.

Chinese consumer price inflation rose 8.5% in April vs. expectations of 8.2%. The number is the second-highest in 2008, after February, where inflation increased 8.7% as a result of snowstorms. Still, the country recorded a surplus of $16.7 billion vs. $13.4 billion in March, leading many economists to speculate that aggressive growth may offset soaring prices.

"We have raised our 2008 GDP growth forecast from 9.5% to 9.8%," writes Lehmans analyst Mingchun Sun in a research note issued Monday in Hong Kong. "Strong domestic demand offsetting weaker external demand seems an ideal scenario for China against a backdrop of an unfolding global downturn."

China Watch: Know the Numbers Before You Buy

Most stocks were sluggish, but still in green territory, as investors mulled the data. After beginning in the red for the day, the Shanghai Composite Index spent the afternoon climbing on bargain sentiment. Still, dealers said the outlook for Hong Kong-listed shares was uncertain, and that late trading in U.S.-listed ADRs will be the best clue. ADRs are expected to see early gains in New York.

Financials were broadly higher. Industrial & Commercial Bank of China ( IDCBF) rose 0.3%, to 6.16 yuan, and Bank of China ( BACHF) inched up 0.2%, to 5.01 yuan.

Among dual-listed Hong Kong and Chinese shares, performances were mixed. China Life Insurance ( LFC) tumbled 0.7%, to 33.20 yuan, and rival Ping An ( PIAIF) dropped 2%, to 62.82 yuan, since these shares do not tend to perform well in times of high inflation.

PetroChina ( PTR) was 0.3% lower, at 17.86 yuan, as crude oil fell 0.7%, to 125.06 a barrel in Singapore trading. Crude oil fell for the fist time in six days, after China announced that its oil imports declined in April on rising prices. Gold was holding up better, at $883 an ounce, due to investors using the commodity as a hedge against China's whopping inflation number.

A-share heavyweights gained the most in Shanghai trading. Aluminum Corp of China ( ACH) leapt 2.3%, to 22.65 yuan, and gas station operator Sinopec Shanghai Petrochemical ( SHL) jumped 1.4%, to 8.16 yuan, despite higher prices in consumer goods. Sinopec stations on the mainland are currently undergoing a nationwide refurbishment to turn them from pure fueling ports to U.S.-style multi-service stations.

Airlines rebounded sharply in the afternoon session. Air China ( AIRYY) added 1.1%, to 14.31 yuan, and China Eastern Airlines ( CEA) rose 0.2%, to 10.40 yuan, after staring more than 5% in the red.

In other news in China, local news stations reported evacuations of offices in Beijing after two earthquakes hit separate areas of the mainland. The larger earthquake, with a 7.8 magnitude, hit Sichuan Province during the afternoon. Traders said that the earthquake's tremors did not have any effect on trading in Shanghai.

In Japan, money supply rose 1.9% vs. analysts' expectations of a little more than 2% according to polls in the local media. Still, lower energy prices prompted a higher dollar, which was a plus for Japanese exports. The yen weakened to 103.32 yen vs. the dollar, from 103.04 previously in the trading session.

Sony ( SNE) rose 0.7%, to 4650 yen, and electronics marker TDK ( TDK) gained 2.3%, to 7120 yen. Yahoo! ( YHOO) subsidiary Yahoo! Japan ( YAHOF) climbed 1.3%, to 44,450 yen, on bargain hunting after rumors that the search engine portal may tie-up with market leader Google ( GOOG).

Elsewhere in Asia, the Taiwanese Taiex rose 0.4%, to 8830.05, and India's Bombay Sensitive Index gained 0.7%, to 16,860.90.

Be sure to check out the Far East Portfolio at Stockpickr.com to find out which Indian and Chinese companies 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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