Sunday, September 4, 2011

China, India Shares Rise; Japan, Korea Slip

Sunday, September 4, 2011

Chinese and Hong Kong stock markets advanced for the first time in three sessions a day after the People's Bank of China further increased banks' reserve requirements, while Indian shares were boosted by early results of some state elections.

Stocks in Tokyo dropped as banks were hit by speculation they may have to waive some loans to Tokyo Electric Power, while shares in Seoul declined after the Bank of Korea surprised the market by not raising a key interest rate.

Hong Kong's Hang Seng index rose 0.9% to 23276.27, China's Shanghai Composite index added 1% to 2871.03, Australia's S&P/ASX 200 gained 0.3% to 4711.4 and in afternoon trading, India's Sensex climbed 1.1% to 18531.28.

Japan agrees to bail out Tepco as news develops that a nuclear reactor suffered a partial meltdown in the Fukushima plant. And in the latest effort to rein in inflation, China orders banks to raise reserve ratios. WSJ's Jake Lee and Peter Stein discuss.

Ending the week on a downbeat note, Japan's Nikkei Stock Average fell 0.7% to 9648.77, South Korea's Kospi slipped 0.1% to 2120.08, Taiwan's Taiex gave up 0.3% to 9006.61 and New Zealand's NZX 50 lost 0.1% to 3535.79.

Hong Kong and Chinese shares overcame volatile early trading to finish higher, as investors shrugged off the PBOC's decision to raise lenders' reserve requirements for the fifth time this year, continuing its efforts to drain excess liquidity from the market.

"The latest tightening move is largely in line with expectations, and has been priced in [in] recent sessions," said Capital Securities analyst Jacky Zhang.

Banks and property stocks advanced Friday, in apparent relief. Agricultural Bank of China and China Construction Bank rose 0.7% and 1% in Shanghai, respectively; in Hong Kong, the stocks rose 0.7% and 0.8%.

Among developers, Poly Real Estate Group added 1.9% in Shanghai, while China Resources Land rose 0.5% in Hong Kong.

Dow Jones Industrial Average futures were up 23 points in electronic trading.

In Japan, banks were pressured by speculation about a loan waiver for Tepco after Chief Cabinet Secretary Yukio Edano said unless banks waive debt dating from before the March 11 earthquake, the public will never accept using tax money to help the utility pay compensation for damage stemming from its nuclear-plant crisis.

Sumitomo Mitsui Financial Group gave up 3.8%, Mizuho Financial Group Inc. lost 3% and Mitsubishi UFJ Financial Group shed 2.8%. Tepco tumbled 5.4% even after the government announced a plan to rescue the company and fund compensation claims.

Lending some support to the market, shares of Nissan Motor rose 3.5% after a solid fourth-quarter earnings report and bullish comments from Chief Executive Officer Carlos Ghosn.

In Seoul, the Kospi extended its morning losses even after the Bank of Korea surprised markets by leaving interest rates unchanged at 3%. Most economists had predicted a 0.25-percentage-point rate increase.

Financial stocks, which benefit from rate increases on expectations for better margins, lost ground after the decision, with Shinhan Financial Group dropping 3.3% and Woori Finance Holdings shedding 1.4%.

Stocks opened lower after a warning from Cisco Systems and a further slide in commodities prices pushed investors into safer assets. Michael Casey explains why an unexpected rebound in the dollar is causing a big sell off.

Hana Financial Group Inc. plunged 15% on worries the lender's proposed 4.69 trillion won ($4.32 billion) offer for Lone Star Funds's 51% stake in Korea Exchange Bank may be on the verge of collapse.

In India, gains in Mumbai came on reports that the ruling Congress Party looked set to win elections in three of the four states and one federal territory, which could strengthen the federal government and push reforms.

Shares of Jaiprakash Associates jumped 3.1% and ICICI Bank added 2%, while Coal India advanced 1.4%.

Elsewhere in the region, Philippine shares finished the day 0.5% lower, Singapore's Straits Times index rose 1.1%, Indonesian shares added 0.6% and Thailand's SET slipped 0.1%.

In foreign-exchange markets, the yen was higher against both the U.S. dollar and the euro as a decline in the Nikkei encouraged some investors to buy the safe-haven Japanese currency.

The U.S. dollar was at ¥80.53, compared with ¥80.94 late Thursday in New York. The euro was buying ¥115.24 from ¥115.32, and $1.4304 from $1.4200.

Nymex crude-oil futures jumped back above $100 a barrel and were trading at $100.38, $1.41 above its New York settlement.

Spot gold was at $1,512 per troy ounce, up $5.10 from its New York settlement Thursday.

Write to Shri Navaratnam at

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