Asian Markets, Fundamentals

Stocks in Asia/Pacific Surge Higher as United Arab Emirates Pledges to Support Banking Industry

Asia Session Key Developments

• Australia Business Inventories Unexpectedly Rise in Third Quarter
• Japan Industrial Outputs Expand for Eighth Month in October
• BOJ’s Shirakawa Says the Central Bank’s Assessment Remains Unchanged

The Asian equities market soared on Monday as the United Arab Emirates pledged to support the banking sector, with the central bank announcing that banks will be able to borrow at a half a percentage point above the three-month benchmark interest rate.  At the same time, the economic docket showed industrial outputs in Japan advanced for an 8^th successive month in October as production increase 0.5% from the previous month versus expectations for a 2.5% rise, while the annualized rate slipped 15.1% from the previous year, which exceeded expectations for a 13.4% decline in production. Meanwhile, Bank of Japan Governor Masakki Shirakawa pledged to take action “decisively” to ensure economic stability. Shirakawa said that the central bank will monitor the yen’s impact on the overall economy, and went onto say that the BOJ’s assessment of the economy remains unchanged. In Australia, the TD securities inflation index jumped 0.3% in November, while a separate report showed business inventories unexpectedly rose 0.8% in the third quarter after contracting 3.1% during the previous period, and the Reserve Bank of Australia is widely anticipated to hike the benchmark interest rate by 25bp to 3.75% as the $1T economy skirts the global recession.

Nikkei 225                          9,345.55

The Japanese equity markets pushed higher on Monday to post the steepest climb since August 24^th, leading the Nikkei 225 to advance 264.03 points (2.91%) and close at 9,345.55. All 10 components traded higher on the day, with financials gaining 5.38% to lead the advance, followed by a 3.77% rise in basic materials.  Shares of Fujitsu soared 6.20% as Japan’s weekly PC sales in the week ending November 15^th jumped 14.4% versus a year ago, while Mizuho Financial Group surged 9.46% as investors expect financial institutions in the region to have limited exposure to Dubai World. At the same time, Mitsubishi UFJ financial Group, Japan’s largest bank by market value pushed 8.56% higher as the company announced that it will raise up to 1.055T yen in a share sale to boost its capital in anticipation of stricter global regulation, while Sumitomo Corp advanced 4.68% after Credit Suisse raised its rating on the firm to “outperform” from “neutral.”

Hang Seng                        22,821.50

Hong Kong shares closed to the upside on Monday, leading the benchmark equity index to surge 687.00 points (3.25%) and end the trade at 21,821.50 as all 9 components traded higher on the day. Shares of Cosco Pacific added 5.88% as Donghai Securities raised the company’s stock from “outer perform” to “add,” while Bank of China rallied 5.81% after announcing that the firm does not have any exposure to Dubai World. At the same time, Wharf Holdings rose 4.24% as the company won a bid for two pieces of land in Hangzhou, Zhejian Province for a total of RMB 2.94 billion, while Cathay Pacific Airways pushed 2.64% higher as global international air travel gained 0.5% in October, according to the International Air Transport Association.

S&P/ASX 200 Index           4,701.30

Stocks in Australia traded higher on Monday, leading the S&P/ASX 200 to rise 129.20 points (2.83%) and close at 4,701.30, with all 10 components pusher higher on the day. Shares of OZ Minerals rallied 3.39% as the firm looks to secure a joint venture with IMX Resources to increase exploration in South Australia, while Fortescue Metals Group, Australia’s third-biggest iron ore producer added 4.99% due to Deutsche Bank AG raising the company’s stock rating  from “sell” to “hold.” Meanwhile, Caltex Australia Limited pushed 6.11% higher on renewed hopes that it’s a$300 million proposal to purchase Exxon Mobil’s Australian filing stations will get approval from regulators, while Australia & New Zealand Banking Group advanced 4.53% after stating that the firm will not face any “material” losses if Dubai World defaults on its loans.

Notable Asian Session Event Risk / Economic Releases