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2007-10-18 04:17:00 p.m. HKT, XFNA
Asian stocks rally as investors focus on growth fundamentals - UPDATE
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(Adds comment, updates share prices)
SINGAPORE (Thomson Financial) - Asian stock markets rallied Thursday with
the Hang Seng briefly trading above 30,000 for the first time as investors
shrugged off another set of grim US housing data and record oil prices to
focus on the regional growth story that many say shows no sign of losing
steam.
The Indian Sensex rose 2.4 percent to 19,167, recovering losses made
Wednesday on worries a regulatory change would push foreign investors out of
the market. Shanghai was left out of the rally after comments from a
government official suggested that the authorities are concerned about the
rapid rise in Chinese shares.
The Hang Seng closed up 0.6 percent at 29,465.05 after touching a high of
30,025 in the first few minutes of trade. The Shanghai Composite lost 3.5
percent to 5,825.
Japan's Nikkei 225 closed up 0.9 percent at 17,106 and the broader TOPIX
rose 1.1 percent to 1,617.
While the state of the US economy is still a theme for investors,
emerging markets will continue to attract foreign capital, given their strong
economic fundamentals, said K Ajith, an analyst at Singapore broker UOB Kay
Hian.
""The market is taking its cue less from the US but more from Hong Kong
and China,"" said Ajith.
The International Monetary Fund on Thursday cut its global economic
growth forecast for 2008 to 4.8 percent from 5.2 percent and said there is a
significant risk that the turmoil in financial markets will take an even
bigger toll.
""Financial market strains could deepen and trigger a more pronounced
global slowdown,"" the agency warned. The US, which is experiencing a housing
recession, will be hit hardest and advanced economies are expected to feel
the spillover effect from the world's biggest economy.
But emerging markets are expected to fare better. Specifically, the IMF
expects the Chinese economy to grow 10 percent in 2008 and India to grow 8.4
percent. Both countries are expected to exceed those growth rates slightly
this year.
The IMF economists expect ""generally sound fundamentals and strong
momentum in emerging market economies"" to cushion the effect of financial
tightening.
Dizzying heights
Some analysts are now cautioning that the dizzying gains enjoyed by Asian
markets this year have left them vulnerable to a sudden correction.
The Hang Seng has gained almost 50 percent so far this year, easily
outperforming the major US benchmarks. The Dow Jones Industrial Average is up
just 11.5 percent, while the S&P 500 is up 8.9 percent and the Nasdaq
composite up 15.6 percent.
The Chinese indexes have fared even better. The Shanghai Composite is up
about 122 percent, while the Dow Jones CBN 600 is up 178 percent. The Indian
Sensex has gained 36 percent.
""The bubble is well formed and expanding but could burst any time,"" said
Sophie Biro, an analyst at Credit Suisse in Hong Kong.
""Under an environment of strong liquidity, the market tends to ignore
standard valuations and concentrates on growth potential. But as stocks reach
new valuation extremes, they are more vulnerable to fall once the markets
start to revert,"" she said in a note.
Chinese shares fell sharply after Tu Guangshao, vice-chairman of the
China Securities Regulatory Commission, said that educating investors about
risks is a key task for market participants. Tu's remarks were carried on the
front pages of three official newspapers, indicating the authorities are
worried about the market's rapid rise.
Tu was also quoted by Hong Kong newspapers as saying that regulators are
studying a plan that could pave the way for swaps between Hong Kong H-shares
and mainland A-shares, in an apparent bid to close the valuation gap in
dual-listed stocks.
Meanwhile, Hong Kong shares gained on a report suggesting the
much-anticipated program that would allow mainland Chinese citizens to trade
Hong Kong stocks directly may be ready in two months.
The Hang Seng China Enterprises index, which tracks 43 stocks from the
mainland, gained 259.98 points or 1.3 percent, after hitting a record high of
20,516.85.
Sun Hung Kai Properties, Hong Kong's biggest developer, rose 3.30 Hong
Kong dollars or 2.5 percent to 135.80 dollars.
China CITIC Bank was up 17 cents or 2.8 percent at 6.31 dollars after the
nation's seventh-biggest bank said it is not in talks to acquire a stake in
Bear Stearns, contrary to statements made earlier by a Chinese regulator and
a top CITIC official.
Bank of Communications jumped 70 cents or 6.4 percent to 11.64 dollars.
China's fifth-biggest bank by assets has confirmed media reports it is eyeing
a 63 percent growth in net profit this year to about 20 billion yuan.
China Construction Bank was down 1 cent at 7.29 dollars. China's
third-biggest bank unveiled plans Wednesday to expand overseas, but it is
facing difficulties in the US as regulators are restricting its access to the
market, according to the bank's chairman, Guo Shuqing.
Sony's sale
In Tokyo, Mitsubishi UFJ Financial Group closed up 23 yen or 2.3 percent
at 1,040, Sumitomo Mitsui Financial Group gained 25,000 yen or 3.0 percent to
848,000, Resona Holdings advanced 8,000 yen or 4.3 percent to 194,000 and
Shinsei Bank was up 6 yen or 1.8 percent at 334.
Kawasaki Heavy Industries climbed 21 yen or 4.9 percent to 446 after the
Japanese heavy machinery maker and shipbuilder said it expects a net profit
of 19 billion yen for its fiscal first half to September, higher than its
previous estimate of 16 billion yen. The company said the
better-than-expected result was due to cost cuts and a soft yen.
Sony Corp gained 30 yen or 0.6 percent to 5,430. The world's
second-largest consumer electronics maker said after the close that it has
agreed to sell production lines for its high-performance Cell microprocessors
used in its PlayStation 3 game console to Toshiba Corp, confirming an earlier
report.
In Sydney, Woodside Petroleum, the leading oil and gas stock, ended up 1.
13 Australian dollars or 2.1 percent at 55.31 dollars. The stock fell early
in the day after the company cut its production forecasts for 2007 to 70-71
million barrels of oil equivalent from its August guidance of output of 72-78
million barrels.
The news weighed against continued record oil prices with the benchmark
crude futures contract spiking above 89 US dollars a barrel in New York amid
continued fears of a Turkish incursion into northern Iraq.
Santos gained 29 Australian cents or 1.9 percent to 15.58 dollars, Oil
Search rose 4 cents or 0.9 percent to 4.56 dollars and Roc Oil jumped 21
cents or 6.1 percent to 3.64 dollars.
Index leader BHP Billiton ended up 1.40 dollars or 3.0 percent at a
record 47.70 dollars, beating Monday's record close of 46.50 dollars. Rio
Tinto gained 2.83 dollars or 2.6 percent to finish at 112.83 dollars, short
of its record close of 113.50 dollars on Tuesday.
In Seoul, chip giant Hynix Semiconductor tumbled to its lowest level in
nearly two years after its quarterly earnings fell short of estimates. The
share closed down 700 won or 2.6 percent at 26,100 won.
The KOSPI closed up 21.15 points or 1.1 percent at 2,005.09.
Elsewhere, the Singapore Straits Times index was down 0.3 percent at 3,
828.
The Kuala Lumpur Composite was up 0.4 percent at 1,379 and the Philippine
Composite rose 0.3 percent to 3,771.
ciara.linnane@thomson.com cl/jg/cl/jm/jg
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