Asian Markets, Fundamentals

Asian Equities Trend Higher as Crude Oil Prices Reach $73/bbl, Hang Seng Pares Gains

Asia Session Key Developments

• Private-sector credit in Australia unexpectedly falls in May
• Japan Finance Minister Yosano says 2009 budget ceiling will be around JPY 52.7T

The Asian stock market pushed higher on Tuesday, with the Nikkei leading the advance, while the Hang Seng gave back gains during the late trade as investors soaked-in profits. Meanwhile, a report by the Japanese government showed unemployment reached a five-year high of 5.2% in May, while household spending unexpectedly increased 0.3% from the previous year, and the data encourages a weakening outlook for the domestic economy as consumers face a weakening labor market. At the same time, housing starts plunged 30.8% in May from the previous year amid expectations for a 27.7% drop, while construction orders plunged 41.9% during the same period.

NKY 225                                           9958.44

The Nikkei 225 gained 174.97 points (1.79%) to end the trading session at 9,958.44, led by a 3.2% rally in basic materials. The breakdown showed all of the 10 sectors advanced, with oil & gas rising 2.7% on the back of higher crude price, while telecommunications gained , led by a 4.3% gain in KDDI Corp. At the same time, Nikon Corp rallied 6.4% after Mizuho Securities raised the firms rating to ‘strong buy,’ while Nippon Steel Corp gained 3.6% after the government said it expects steel production to fall at a slower place throughout the year. Moreover, Mitsui Co, the Japanese trading firm which obtains more than half of its profits from commodities, added 2.2% following the rise in crude oil prices, with shares of Inpex Corp, the largest oil explorer in Japan, advancing 5.0%.

HSI                                                         18422.32

Shares in Hong Kong tipped lower towards the end of the session, with the Hang Seng falling 125.11 points (0.71%) to close at 18,396.97. Eight of the nine components slipped lower, with the decline led by a 4.8% drop in consumer goods, while oil & gas gained 0.3% following the rise in crude prices. China Petroleum & Chemical Corp, the largest oil refiner in China, advanced 3.3%, while Bank of China Ltd gained 0.3% after a news report said new loans may exceed 1T yuan in June. At the same time, Cathay Pacific Airways led the market higher, with its shares gaining 3.9% as investors anticipate the firm to trim losses from hedging against higher oil price during the previous year.

ASX 200                                            3954.90

The Australian benchmark index advanced 68.00 points (1.75%) to end at 3,954.90 in Sydney, with all 10 components moving higher. The rally was led by a 2.8% gain in consumer services, with industrials rising 2.3%, while basic materials climbed 2.3% following the rebound in commodity prices. BHP Billiton, the largest mining company in the world, gained 2.4%, with Rio Tinto gaining 3.8%, while Woodside Petroleum added 1.6% as crude price reached $73/bbl during the trade. In addition, shares of David Jones Ltd, the second-largest department store in Australia, surged 10.1% after the firm raised its profit forecast for the second-half, while Harvey Norman Holdings advance 8.6% after Credit Suisse raised its outlook for the firm.

Notable Asian Session Event Risk / Economic Releases