HONG KONG (MarketWatch) — Mainland Chinese and South Korean shares advanced Thursday, while most other equity markets came off earlier lows as bargain buyers circled back into equities on attractive valuations.
China’s Shanghai Composite Index /zigman2/quotes/206600939/delayed CN:000001 -0.57% finished the day 1.3% higher at 2,581.51, South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -1.47% added 0.6% to 1,817.44 and Australia’s S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -1.73% ended little changed at 4,140.8. Each of them erased initial losses.
Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -2.67% fell 1% to 19,595.14 and Japan's Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -2.53% dropped 0.6% to 8,981.94. Taiwan’s Taiex declined 0.2% to 7,719.09, unable to hang on to early gains.
“At the current level, valuations look just too attractive. A lot of people have already sold what they needed to, so maybe there is some room to buy,” said Yoji Takeda, head of Asian equities at RBC Investment.
Asia Today: Yuan on the rise
The yuan hits a record high against the dollar, a sign that the Chinese central bank is using currency appreciation to rein in high inflation.
Some reports also cited speculation about state-owned funds as a reason for the support to the Chinese market. Dow Jones Newswires cited a Chinese media account as saying that the National Council for Social Security Fund had bought at least 10 billion yuan ($1.6 billion) worth of stocks since Tuesday.
Separately, Takeda pointed to speculation of government institutions in South Korea and Taiwan also being among the buyers.
The choppy session followed another day of hefty losses Wednesday on Wall Street, when the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.53% tumbled 4.6% on worries that European debt troubles were now spreading to France. However, Dow industrials futures jumped more than 1.5% by the end of the day’s trading session in Hong Kong.
“We think a sustained rally in risk assets depends on a significant and sustained reduction in euro-zone debt anxiety. It will take either strong global growth or a comprehensive solution to the debt crisis. Neither is the baseline scenario,” said Prakash Sakpal, an economist at ING Financial Markets Research.
Gains in Shanghai were led by airline stocks on hopes that steep recent fall in crude-oil prices and a rising yuan would cut their fuel costs, with bargain buyers also snapping up some banks and property developers.
Shares of Air China Ltd. /zigman2/quotes/207207351/delayed AIRYY -1.23% /zigman2/quotes/203341301/delayed CN:601111 -0.84% /zigman2/quotes/203408003/delayed HK:753 -3.80% jumped 4.9%, and China Eastern Airlines Corp. /zigman2/quotes/205483076/composite CEA -3.64% /zigman2/quotes/203578936/delayed HK:670 -3.05% /zigman2/quotes/208816122/delayed CN:600115 -1.24% soared 10.1%; in Hong Kong, they gained 2.9% and 6.5%, respectively.
Attractive valuations also pushed several financials higher in the region, with China Construction Bank Corp. /zigman2/quotes/207732534/delayed CICHY -2.32% /zigman2/quotes/208974133/delayed HK:939 -1.35% rising 1.7% in Hong Kong, Cathay Financial Holding Ltd. jumped 5.9% in Taipei, Australia & New Zealand Banking Group Ltd. /zigman2/quotes/205482049/delayed AU:ANZ -0.73% /zigman2/quotes/204542251/delayed ANEWF +0.41% climbing 1.5% in Sydney and Korea Exchange Bank up 3% in Seoul.
HSBC Holdings PLC /zigman2/quotes/203901799/delayed UK:HSBA -6.70% /zigman2/quotes/202687335/delayed HK:5 -3.90% dropped 2.9%, however, as trade resumed after being halted Wednesday afternoon, because of a disruption to the exchange’s corporate-announcements website.
In Tokyo, Shinsei Bank Ltd. /zigman2/quotes/210166295/delayed JP:8303 -0.62% /zigman2/quotes/209928917/delayed SKLKF +8.92% fell 2.2%, and Mitsubishi UFJ Financial Group Inc. /zigman2/quotes/207520099/delayed JP:8306 -1.87% dropped 1.9% after a tumble for their Wall Street peers.
In Hong Kong, Tencent Holdings Ltd. /zigman2/quotes/204605823/delayed HK:700 -3.01% /zigman2/quotes/207908563/delayed TCEHY -1.13% , Cathay Pacific Airways Ltd. /zigman2/quotes/203532437/delayed HK:293 -4.11% /zigman2/quotes/208114856/delayed CPCAY -4.89% and Hong Kong Exchanges & Clearing Ltd. /zigman2/quotes/200234512/delayed HK:388 -1.36% /zigman2/quotes/201215503/delayed HKXCY -1.71% all lost ground — by 4.7%, 2% and 3.3%, respectively — after each reported first-half results.
Thursday marked the second day of gains in Seoul after the government there banned short-selling for three months, in the wake of extreme losses. The Kospi is still the worst performer among Asia’s major benchmarks so far in August, with a net loss of 14.8%.
UBS strategists advised clients in a report to buy 11 “fallen angels,” including Samsung Electronics Co. and Hyundai Motor Co., following their sharp pullback and the government’s ban on sale of borrowed stock. Samsung /zigman2/quotes/202367843/delayed SSNLF +30.66% fell 1.7%, while Hyundai /zigman2/quotes/204364212/delayed HYMTF -3.76% added 2.3% Thursday.
Japanese exporters declined as the dollar dropped below the 77-yen mark. Panasonic Corp. /zigman2/quotes/201785256/delayed JP:6752 -2.81% fell 1.7%, and Sony Corp. /zigman2/quotes/201361720/delayed JP:6758 -1.93% surrendered 2.2%.
Supporting the Australian stock market, shares of Telstra Corp. /zigman2/quotes/201936124/delayed AU:TLS -0.74% /zigman2/quotes/202275272/delayed TTRAF +0.28% rose 5.7% after the telecommunications major’s profits beat analyst forecasts. See report on Telstra earnings.