By Ese Erheriene
Stocks rose sharply across the board in Asia on Friday, catching an updraft from record highs in the U.S. that offset disappointing economic news from China.
The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.78% closed up 1.1% at its highest level since the start of June. Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -1.54% ended up 0.4%, and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI +0.59% was last up 0.9%. South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 -0.24% closed 0.1% higher, while Singapore’s Straits Times Index /zigman2/quotes/210597985/delayed SG:STI +0.30% closed down 0.2%.
On Thursday, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.51% , S&P 500 /zigman2/quotes/210599714/realtime SPX -1.08% and Nasdaq Composite Index /zigman2/quotes/210598365/realtime COMP -0.86% all closed at record levels in the U.S. on the same day. It was the first time since 1999 the U.S. indexes have managed that feat, propelled by firmer oil prices and stronger-than-expected earnings from the retail sector.
“Certainly it’s positive,” said Caroline Yu Maurer, head of greater China equities at BNP Paribas Investment Partners, which manages close to 533 billion euros ($593 billion). “For global investors, the U.S. is a good indicator of risk appetite. If the U.S. continues hitting highs, it will benefit all the other markets.”
Chinese hopes for Stock Connect
Sharp gains in property and banking shares on Friday led the Shanghai market to its highest level in a month, as investors bet that the Shenzhen-Hong Kong Stock Connect scheme would soon be formalized.
“We noticed that institutional funds have flowed into the domestic market steadily in the past few sessions,” said Simon Wang, an analyst at Guoyuan Securities, pointing to expectations for the launch of Shenzhen-Hong Kong Stock Connect.
A Chinese subindex tracking the property sector surged 5% while banking stocks rallied 2.4%. At least six property stocks, including China Vanke /zigman2/quotes/205643772/delayed CN:000002 +0.33% and China Calxon /zigman2/quotes/205767260/delayed CN:000918 +1.97% , hit the 10% daily upward limit.
Chinese power plant blast kills 21
Just a day before the first anniversary of one of China’s worst industrial accidents in history, a high pressure steam-pipe at a power station in central China exploded during testing, killing 21 workers.
The gains in China stocks came despite a swath of economic data that missed expectations. In July, Chinese industrial output grew 6% from a year earlier, below a forecast of 6.2%, which was the growth that was recorded in June. Chinese retail sales rose 10.2% from a year earlier, below expectations for a 10.5% increase and the 10.6% growth posted in June.
“I don’t think anyone was expecting [that data] to surprise on the upside,” said Maurer. “People are getting used to it now, so it’s not a big shock.”
Indicative of traders’ resilience, Hong Kong-listed shares in Chinese banks rose. Bank of China /zigman2/quotes/209359942/delayed CN:601988 0.00% was up 0.9% at the session’s end, while China Construction Bank Corp. /zigman2/quotes/208058581/delayed CN:601939 -0.28% was 0.5% higher and Bank of Communications Co. /zigman2/quotes/207155262/delayed CN:601328 +0.18% jumped 2%.
Bullish period for stocks
The gains in Asian markets come during a bullish period for equity markets, as a low-rate environment prompts investors to pull money out of bonds and put it into stocks.
“There seems to be few other places for investors to look [for yields] at the moment,” said Daniel Metcalfe, a senior investment adviser at OM Financial Ltd.
Even improving odds for a December interest-rate increase by the U.S. Federal Reserve haven’t damped traders’ enthusiasm. Fed funds futures traded on the Chicago Mercantile Exchange showed a 42.6% likelihood of a December rate increase, up from 36.4% a day ago.
Rising U.S. interest rates typically draw money toward U.S. assets and away from emerging markets such as Asia.
Elsewhere, Thursday’s rate cut by the Reserve Bank of New Zealand continued to support New Zealand’s NZX 50 Index /zigman2/quotes/211587880/delayed NZ:NZ50GR -0.31% , which closed up 0.1%.
A softer yen supported the shares of Japanese exporters, with Toyota Motor Corp. /zigman2/quotes/203803129/delayed JP:7203 -0.62% up 0.9%, Mazda Motor Corp. /zigman2/quotes/204777714/delayed JP:7261 -1.21% gaining 2.2% and Mitsubishi Motor Corp. /zigman2/quotes/202404490/delayed JP:7211 +1.88% ending 1.3% higher.
Shares in Sharp Corp. /zigman2/quotes/203224600/delayed JP:6753 -4.09% surged 19% after Chinese antitrust authorities approved Foxconn Technology Group’s /zigman2/quotes/204111604/delayed TW:2354 +0.52% offer to buy the Japanese electronics firm.
Toshiba Corp. /zigman2/quotes/205628942/delayed JP:6502 +0.84% maintained its gains, last up 3.8%, after the Nikkei newspaper reported that the company was estimated to have posted an operating profit of 20 billion yen ($196 million) in the April-June period — its first profit in six quarters.
In Hong Kong, CK Hutchison Holdings Ltd. /zigman2/quotes/208405501/delayed HK:1 -1.23% reported a 3% rise in net profit for the first half, as growth at its telecommunication and infrastructure operations was partly offset by reduced profitability at its energy operations.
The market will be watching coming U.S. retail sales figures due Friday for further clues to the health of the world’s biggest economy.