sia Pacific shares turned mostly higher on Tuesday, 26 May 2015, on tracking rally in Hong Kong and China, after Beijing announced an array of infrastructure projects as open to private investment and slashing tariffs on imported clothing and other consumer goods. Investors lacked other cues, with markets in London and the U.S. closed for holidays on Monday.
China’s top economic planner has joined in the promotion of the Public-Private-Partnership model (PPP). China’s National Development and Reform Commission (NDRC) released a list of 1043 proposed PPP projects totaling RMB1.97 trillion (US$317.75 billion), and is inviting private capital to participate. The proposed projects are in the transport, water conservancy, natural resources, and public services sectors.China is increasingly turning to PPP to fund projects that were previously funded by local government off-balance sheet borrowings. The government also announced it would halve import taxes on clothing, cosmetics and some other goods by half in a new tactic to spur consumer spending and economic growth.
But, gains on the regional bourses were limited on concerns about the prospect of a Greek default and ahead of key US economic data. Concern about the prospect of a Greek default renewed after the Athens has warned that the country would be unable to make a 305 million euro payment to the International Monetary Fund due on June 5 if a cash-for-reforms deal with its international lenders is not reached by then. Investors are watching closely for any new developments in talks between Greece and its international creditors over unlocking bailout funds, with no deal in sight and 1.6 billion euro of payment due to the IMF between June 5 and June 19.
A series of US economic data scheduled to release this week such as durable goods orders and consumer confidence both due on Tuesday, and revised first-quarter economic growth due on Friday.
Among Asian bourses
Australia market gains 0.9%; bank, miner leads rally
The Australian share market finished higher for fourth straight session, on the back of strong performance by materials and big four banks following months of selling and as a rebound in iron ore prices. The benchmark S&P/ASX 200 Index advanced 51.90 points, or 0.91%, to 5773.40, while the broader All Ordinaries Index rose 50.50 points, or 0.88%, to 5770.40.
Shares of mining and energy companies closed higher. Fortescue Metals Group (FMG) led the mining stocks rally, with gain of 10.6% to A$2.40 on the back of speculation Chinese investors are interested in buying a stake in the company. Rio Tinto and BHP Billiton both closed 1.2% up at A$58.29 and A$29.82, respectively. AGL Energy jumped 6.4% to close at an eight-year high A$16.47 after the company said it’s targeting about A$1 billion in asset sales and A$200 million of cost cuts by the end of 2016-17.
Aristocrat Leisure stocks zoomed 6.5% to A$8.38 after posted a 35% profit growth in the first half of the 2015 financial year. Aristocrat Leisure said its first-half net profit jumped 35% to A$77.6 million on the back of 73% jump in revenue to A$699.2 million, on the back of strong growth in its US business after last year’s A$1.3 billion purchase of Video Gaming Technologies and a surge in revenue from its fast-growing digital unit.
Nikkei holds at 15-years high on weaker yen
Japanese share market closed the session with firm footing, on the back of yen depreciation to 122-level against the greenback. But, concerns about the prospect of a Greek default and ahead of key US economic data limited the gains. The Nikkei Stock Average ended up 0.12%, or 23.71 points, to 20437.48, extending a 15-year high. The Topix index of all Tokyo Stock Exchange First Section issues advanced 0.03%, or 0.42 point, to 1659.57.
Shares of currency sensitive exporters gained as yen depreciated to 122 level against the US dollar. A weak yen is positive for Japanese exporters as it makes them more competitive abroad and inflates profits when repatriated. Fast Retailing gained 0.4% and Secom added 1.0%. Tokyo Electron rose 1.9%, Kyocera added 0.8%, and Yamaha Corp. gained 2.4%.
Suntory Beverage & Food., which sells PepsiCo Inc. drinks in Asia, slipped 1.7% after saying it will buy Japan Tobacco Inc.’s vending machines for about 150 billion yen. Japan Tobacco Inc. slipped 0.1% to 4694 yen.
AEON Financial Service Co. gained 1.7% as Jefferies LLC upgraded shares of the credit-card provider to hold from underperform.
Oil refiner JX Holdings ended up 2.8% after a Nomura Securities upgrade to buy from neutral, citing favorable conditions amid rising crude-oil prices and a weak yen.
Japan Airlines gained 3.8% after Credit Suisse said the company was “undersold by management and underappreciated by investors,” especially with respect to overly conservative revenue assumptions. ANA Holdings also rose 1% after CS lifted its target price to Y380 from Y345.
China market surges to highest level since November 2008
Mainland China share market advanced for sixth straight session, as risk appetite buying sustained after government announced Friday that cross-border sales of funds will begin July 1 and on signs of fresh policy support toward the sector. The Shanghai Composite Index advanced 97.10 points, or 2.02%, to finish at 4910.90 points, taking its six-day rally to 15%. The CSI300 index added 99.42 points, or 1.95%, to 5198.92.
All 10 SSE industry groups ended higher, with tech stocks being top gainer on fresh signs of government support. Shanghai announced an ambitious plan to build the city into a globally competitive technological innovation centre. Defence-related stocks also surged, after Beijing released its white paper on China’s military strategy. Banking stocks were sluggish on fears over the sector’s asset quality, after China’s banking regulator warned of rising credit risk from real estate, local government debt and unconventional forms of finance.
The Ministry of Finance said in a statement yesterday it would lower import taxes for some products starting from June 1 by an average of over 50% as an important measure to create stable growth and push forward structural reform. Import tariffs for Western-style clothing will be reduced to between 7-10% from 14-23%, and taxes on ankle-high boots and sports shoes cut in half to 12%, the ministry said. Tariffs on diapers and skincare products will drop to 2% from 7.5% and 5%, respectively. The ministry said lowering duties should steer a shift in consumers’ shopping habits, helping boost imports and domestic consumption.
Hong Kong stocks jump on new cross-border investment scheme
The Hong Kong stock market finished solidly higher on heavy volume, catching-up yesterday’s rally in the Mainland bourses, after news that China will soon launch a link allowing Hong Kong and mainland asset managers to sell funds to retail investors on either side. The Hang Seng Index ended up 257.03 points or 0.92% to 28249.86, off an intra-day high of 28524.60 and day low of 28237.49. The Hang Seng China Enterprises Index, benchmark measure of performance of mainland China enterprises, added 368.58 points, or 2.55%, to 14801.94 points. Turnover rose to HK$200.16 billion from HK$142.6 billion on last Friday. Hong Kong stock market closed on Monday for holiday.
HK participants were apparently encouraged by a new cross-border investment scheme announced over the weekend that would allow funds domiciled in Hong Kong and China to be sold in each other market starting July 1. The initial quota will be a total 600 billion yuan ($97 billion), split evenly in each direction. Market pundit expects the scheme, called mutual fund recognition, will bring a fresh flood of mainland capital to Hong Kong’s market and is a big positive for the city’s stocks. China launched the landmark Shanghai-Hong Kong stock connect last November and plans to roll out a similar investment link between Hong Kong and Shenzhen later this year.
Brokerage stocks gained after the launch of the Mainland-HK mutual recognition of funds (MRF) scheme. Haitong Sec (06837) gained 5.39% to HK$25.4 while China Galaxy Securities (06881) put on 3.32% to HK$13.7.
Shares of stock-exchange operator Hong Kong Exchanges and Clearing jumped 5.4% to record high HK$309.40 on hopes that the bourse would benefit from accelerated opening of China’s capital markets.
Sensex, Nifty hit lowest level in more than a week
After languishing in negative zone in afternoon trade, key benchmark indices extended losses in mid-afternoon trade. The barometer index, the S&P BSE Sensex, and the 50-unit CNX Nifty, both, hit their lowest level in more than a week. At 14:15 IST, the S&P BSE Sensex was down 131.51 points or 0.48% at 27,512.37. The Nifty was down 35.65 points or 0.43% at 8,334.60.
Pharma stocks declined. Cement stocks also edged lower. Index heavyweight and cigarette major ITC edged lower. Another index heavyweight and housing finance major HDFC also declined. Dish TV India hit 52-week high after the company during market hours today, 26 May 2015, reported turnaround Q4 March 2015 results.
Meanwhile, Reserve Bank of India (RBI) Governor Dr. Raghuram G. Rajan yesterday, 25 May 2015, said that while India’s macro economic parameters have improved, growth was still slow in picking up. Finance Minister Arun Jaitley yesterday, 25 May 2015, said India has to bring the tax rate to global level while at the same time remove the exemptions.
Meanwhile, after the completion of one year in office, the Narendra Modi government has hit pause on labour reforms. The Ministry of Labour & Employment today, 26 May 2015, announced that the government has decided to constitute an inter-ministerial committee to hold threadbare discussions with representatives of Central Trade Unions on 10 point charter of demands and other issues being raised by them and for recommending measures to address those issues.
Foreign portfolio investors bought Indian shares worth a net Rs 74.14 crore yesterday, 25 May 2015, as per provisional data released by the stock exchanges. Domestic institutional investors (DIIs) bought shares worth net Rs 0.17 crore yesterday, 25 May 2015, as per provisional data released by the stock exchanges.
Elsewhere in the Asia Pacific region: Taiwan’s Taiex index grew 0.25% to 9669.41. South Korea’s KOSPI fell 0.1% to 2130.30. New Zealand’s NZX50 added 0.02% to 5795.86. Singapore’s Straits Times index was 0.05% up at 3456.85. Malaysia’s KLCI declined 0.2% to 1764.07. Indonesia’s Jakarta Composite index added 0.6% to 5320.90.
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