HONG KONG (MarketWatch) — Chinese shares soared to lead Asian markets by a wide margin Friday as strong manufacturing data boosted confidence about an economic recovery in the world’s second largest economy.
The Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 -1.25% soared 4.3%, helping other regional markets add to gains or pare early losses, after an initial measure of HSBC’s China manufacturing Purchasing Managers’ Index for December rose to a 14-month high of 50.9. The performance marked the index’s best single-day percentage gain since October 2009.
HSBC’s chief China economist Hongbin Qu said the improvement in the latest survey results confirmed that China’s “ongoing growth recovery is gaining momentum, mainly driven by domestic demand conditions.” Read: China manufacturing data show further improvement.
Japan’s Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -3.34% and South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +1.18% pared early losses to finish down 0.1% and 0.4%, respectively, while Taiwan’s Taiex dropped 0.8%.
/zigman2/quotes/210598065/realtime DJIA 27,960.80, -1,032, -3.56%
The drop in Tokyo came ahead of the weekend general elections, and after the Bank of Japan’s tankan survey showed sentiment among large manufacturers deteriorated more than expected in the fourth quarter. Read: Japan tankan survey shows sentiment worsening.
“While many have been adjusting holdings ahead of the Japanese elections and squeezing every pip possible out of the yen, Chinese traders have also been in high spirits after a slightly stronger-than-expected HSBC PMI print,” said Chris Weston, chief market strategist at IG Markets.
Also lending support, a report in the state-run China Securities Journal said the country’s securities market regulator may try to avert an oversupply of shares by encouraging listing applicants to instead raise funds from other venues, such as the over-the-counter equity market, the bond market or overseas markets.
Several financial stocks posted solid gains on mainland Chinese bourses Friday. Bank of Nanjing Co. /zigman2/quotes/206920521/delayed CN:601009 -1.12% spiked by the day’s 10% limit, Southwest Securities Co. /zigman2/quotes/201082446/delayed CN:600369 +5.08% surged 8.2% and Ping An Insurance Group Co. /zigman2/quotes/202212125/delayed PNGAY -3.56% /zigman2/quotes/202773380/delayed CN:601318 -0.66% gained 8% in Shanghai. In Shenzhen, Hong Yuan Securities Co. rose 9%, while Ping An Bank Co. climbed 8%.
Peter Lai, director at DBS Vickers said “confidence has come back and people are chasing the laggards,” such as commodity companies and infrastructure firms.
The Shanghai market has also been an big under-performer this year, Lai said, and has seen a lot of fund outflows, which he said may now be starting to return to the market.
The Shanghai Composite still ranks among the 2012’s worst performers in Asia, and is still down 2.2% in the year to date. But after Friday’s performance, the Shanghai Composite ended this week with a net gain of 4.3%. The index is now up 8.6% so far in December, greater than the advance for other regional benchmarks.
Other movers in Asia
The performance in Shanghai helped cheer markets in Asia, which began the day mostly lower after major U.S. equity markets dropped Thursday amid more concern over the fiscal cliff. Read: U.S. stocks end lower on fiscal-cliff jitters.
Perpetual Investments head of investment market research Matthew Sherwood said that concerns over the fiscal cliff outweighed Thursday’s strong U.S. retail sales data and lower jobless claims, “with U.S. House Leader [John] Boehner stating that President [Barack] Obama’s plans were not balanced, which shook expectations of progress.”
Japanese economy tops pre-election concerns
Polls show Japan's main opposition Liberal Democratic Party will return to power in the Dec. 16 general election.
In Japan, meanwhile, the yen’s weakness failed to lift stocks despite the Chinese data and further weakness in the local currency.
The U.S. dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.1400% rose as high as ¥83.95 during the session, touching highs not seen since March, and was at ¥83.73 by late afternoon.
Weakness in the yen ahead of Japan’s general election — expected to result in a win by the opposition, which favors even looser monetary policy — and fresh easing moves from the U.S. had helped rally Japanese exporter stocks on Thursday.
Shares of Fujitsu Ltd.
leaped 6.8% and Sharp Corp.
surged 7.6%, adding to Thursday’s gains following reports Apple Inc.
was working with the firm to test television designs.
However, the weak tankan appeared to hit other firms, with Fast Retailing Co. /zigman2/quotes/200663563/delayed JP:9983 -4.15% /zigman2/quotes/203924235/delayed FRCOY -2.89% dropping 1.4%, Hino Motors Ltd. /zigman2/quotes/209422954/delayed JP:7205 -3.37% losing 0.6% and Nissan Motor Co. /zigman2/quotes/207656007/delayed NSANY -2.66% /zigman2/quotes/208298710/delayed JP:7201 -4.50% shedding 0.4%.
In Hong Kong, meanwhile, HSBC Holdings PLC /zigman2/quotes/202687335/delayed HK:5 -0.80% rose 0.6% after Deutsche Bank upgraded the lending giant to buy from hold, in part on an improving outlook for Asia.
In Seoul, Samsung Electronics Co. /zigman2/quotes/209800866/delayed KR:005930 +1.94% /zigman2/quotes/202367843/delayed SSNLF 0.00% fell 1.2% and Hyundai Motor Co. dropped 0.4% on profit-taking after recent gains. The stocks ended the week up 2.4% and 1.6%, respectively.