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Tuesday, 29 September 2009

Nikkei Recovers; Autos, Techs Up

Technology and automobile stocks paced a broad rebound in Asian markets Tuesday, encouraged by strong overnight gains on Wall Street and expectations of improving global demand.

Japanese shares were aided by the yen's modest weakness against major currencies after Monday's rally, with the Nikkei 225 Average rising 0.9% to 10100.20.

Hong Kong's Hang Seng Index advanced 2.1%, ending higher for the first time in five sessions, while Australia's S&P/ASX 200 gained 1.6% to end at an 11-month high. South Korea's Kospi rose 0.9%, Taiwan's Taiex climbed 2% and New Zealand's NZX 50 added 0.8%.

Dow Jones Industrial Average futures were recently down 10 points in screen trade after the DJIA gained nearly 125 points in the previous session.

The Philippines' main share index rose 0.8%, recovering from Monday's drop, though trading volumes were weak as investors assessed the damage from Typhoon Ketsana.

In Afternoon trading, India's Sensex was up 1% after Monday's holiday and Singapore's Straits Times Index rose 1.6% higher.

The Shanghai Composite bucked the trend, falling 0.3% to 2754.54 and taking losses into a third straight session on concerns over liquidity due to a slew of new listings and on caution ahead of the National Day holidays starting Thursday. The markets reopen on Oct. 9.

"Buying interest has been dismally low lately because investors are in a holiday mood and those who want to buy are refraining from doing so, in case global markets tumble during the hiatus," said Huatai Securities analyst Chen Huiqin.

Automobile stocks rose amid expectations of improving demand, with Deutsche Bank analysts noting a strong improvement in production in North America and China in August.

Nissan Motor rose 3.3% and Honda Motor gained 1.1% in Tokyo, also aided by the yen's weakness. Kia Motors gained 3.6% in Seoul, while Dongfeng Motor Group rose 3.1% in Hong Kong after Nomura International upgraded the stock to "buy" from "neutral" on stronger-than-expected pricing power and lower inventory levels.

Technology shares rose sharply after their U.S. peers outperformed on Wall Street overnight. Samsung Electronics gained 2% in Seoul and Elpida Memory added 1.6% in Tokyo.

In Taiwan, flat-panel and chip makers led gainers after an Economic Daily News report quoted the economics minister as saying the government would gradually allow them to set up more advanced factories in China and acquire Chinese peers. AU Optronics was up 2.8%, Taiwan Semiconductor Manufacturing rose 4.9% and Chi Mei Optoelectronics gained 2.8%.

Ranking among gainers in Sydney, National Australia Bank added 2% and BHP Billiton climbed 2.4%.

"Every time we get a couple of days of weakness, investors want to buy equities. I think the [the S&P/ASX 200] will be well supported around here and we will potentially see a break out towards 5000 later this year. It's still cheap on a midcycle basis," said UBS head of institutional sales George Kanaan.

In the foreign exchange markets, the U.S. dollar was at 89.79 yen from 89.61 yen in late New York trade, after hitting an eight-month low at 88.23 yen Monday. The euro was flat against the Japanese unit at 130.91 yen, but slipped against the greenback to $1.4576 from $1.4606.

Hiroshi Maeba, senior dealer at Nomura Securities noted that low U.S. interest rates, repatriation of overseas earnings by Japanese firms before end of fiscal half-year this week could "keep the [dollar's] topside quite heavy."

Still, some analysts advised caution as "today's buying is just short-covering, so [the market's] gains will be limited," said Yumi Nishimura, market analyst at Daiwa Securities SMBC. "The foreign exchange market is going through a correction after the yen strengthened a bit too much against the dollar recently," she said. However, "The market remains cautious about possible further yen strengthening near-term."

Japanese government bonds fell as the stock market rebounded, with the lead December futures contract rising 0.06 to 139.37 points, while the benchmark 10-year yield was up 0.5 basis points at 1.285%.

Nymex crude oil futures for November were recently five cents higher at $66.89 on Globex, while spot gold rose $2.50 to $993 a troy ounce.

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