By Laura He and Michael Kitchen, MarketWatch
HONG KONG (MarketWatch) -- Asian stocks ended Monday's session
broadly higher, with Japan regaining momentum after a record Wall
Street close on Friday and upbeat Chinese manufacturing data over
the weekend. Meanwhile, Chinese markets were closed for a
holiday.
Both the S&P 500 (SPX) and the Dow Jones Industrial Average
(DJI)closed at record levels on Friday, gaining 0.2% and 0.1%
respectively. On Sunday, data from China's National Bureau of
Statistics showed that Chinese factory activity expanded faster
than expected in May, rising to 50.8 from 50.4 in April.
Boosted by the U.S. gains and Chinese data, Japan's Nikkei 225
staged another rally on Monday, ending up 2.1%. The index has
increased in 7 of the past 8 sessions, with Friday providing a
small setback with a 0.3% loss. The broader Topix index also
finished 1.6% higher.
Australia's S&P/ASX 200 settled 0.5% higher, and South
Korea's Kospi index closed up 0.4%.
Meantime, markets in Hong Kong, mainland China, New Zealand, and
Taiwan were closed due to public holidays.
In Japan, the dollar strengthened against the yen (USDJPY) on
improved investors' risk appetite, buying Yen102.041 from
Yen101.800 on Friday's close. Tech exporters were aided by the
weaker yen, as Hitachi Ltd. jumped 3.5%, Olympus Corp. climbed
2.8%, and both Panasonic Corp. and Renesas Electronics Corp. gained
2.7%. However, Dai-Ichi Life Insurance , one of Japan's largest
life insurers, tumbled 5%, after news reports said the company is
in talks for an acquisition of U.S. peer Protective Life for $4.9
billion.
In Australia, the Aussie dollar (AUDUSD) dropped to 92.54 U.S.
cents from 93.09 U.S. cents in the prior session.
Financial stocks were stronger, as National Australia Bank Ltd.
advanced 1.2%, Commonwealth Bank of Australia rose 0.8%, and
Australia and New Zealand Banking Group Ltd. added 0.7%. Miners
were mixed, with Alumina Ltd. gaining 2.5%, while BHP Billiton Ltd.
(BHP) lost 1.1%.
China over the weekend: Good data, more easing
Chinese markets, both on the mainland and in Hong Kong, were
closed for the Dragon Boat Festival, but investors will have plenty
to chew over when trading reopens after some strong manufacturing
data and plans to ease the reserve requirements for some banks.
First a bit more analysis on the data: The government version of
China's manufacturing Purchasing Managers' Index, released Sunday,
showed stronger-than-expected growth in activity.
"The upside surprise was led by the new-orders index, which rose
to a six-month high, reflecting the government's continued effort
since mid-March to boost investment and construction activities,"
wrote analysts at Barclays, though they added that "the recovery
remains at its early stage and is not broad based."
Bank of America-Merrill Lynch took a similar view that the
numbers were modestly positive, although they cited a pre-data
consensus of 50.7, making the result slightly less of a
surprise.
"Markets will respond positively to the improved PMI reading,
even it's pretty much expected," they wrote, reiterating their GDP
growth forecast for the current quarter at 7.5%, up from 7.4% in
January-March.
When the markets reopen on Tuesday, we will also get a look at
the final reading for HSBC's version of the China manufacturing
PMI, with a previously released preliminary edition printing at
49.7, up from 48.1 in April.
And then the policy moves: Late Friday, the State Council
(China's cabinet) said it would, among other things, (1) reduce
some of the corporate-tax burden and public fees paid by
corporations, and (2) ease credit access for small business and
reduce the required reserve requirements for certain lenders.
Reacting to the announcements, J.P. Morgan said the tax moves
are a step "in the right direction, as weak corporate profit is a
critical issue, and also affects income growth (and hence stable
consumption growth)."
However, it sees the monetary and credit-easing plans as modest
and representing "fine-tuning" rather than a major policy
shift.
"This is consistent with our view that monetary policy will not
be eased substantially," the J.P. Morgan analysts wrote. "The two
most important indicators for monetary policy stance are policy
rates and credit growth, which we expect to remain unchanged for
the rest of the year."
(Some material in this report is from MarketWatch's Asia Stocks
blog.)
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