Asian Markets, Fundamentals

Stocks in Asia/Pacific Advance as Japan’s Cabinet Office Holds Improved Outlook for Global Growth

Asia Session Key Developments

• Japan’s Cabinet Office Maintains Economic Assessment for Fifth Month
• Japan’s Small Business Confidence Weakens Further
• Australia’s Leading Index Slips Lower in October

Asian stocks pushed higher on Tuesday as policy makers in Japan held an improved outlook for global growth, driving the Nikkei 225 to its highest close since September 24^th of this year. Japan’s Cabinet Office said economic activity in the region is “picking up” during its monthly report in Tokyo, and maintained its assessment for the fifth consecutive month as the economy emerges from the worst recession since the post-war period. In addition, policy makers noted that small and mid-sized firms remained “cautious” even as business confidence improves, and went onto say that the country remains in a “mild deflationary phase” as private sector spending falters. Moreover, Bank of Japan Governor Shirakawa said monetary policy should not be driven by short-term price movements as it fuels economic imbalances, and argued that instability in the global financial system would weigh on the nation’s banking sector as credit conditions remain tight. Nevertheless, the index of small business confidence in Japan slipped to 40.4 in December from 43.0 the month prior, while supermarket sales plunged 8.0%, and conditions may get worse going into the following year as policy makers see a risk for a protracted recovery. In Australia, the conference board leading Index for October pushed 0.3% lower, marking its first decline in 5 months as rural goods exports and shares prices tumble, while overall balance of payments in Hong Kong fell to $106.63 billion in the third quarter from $143.10 billion the quarter prior.

Nikkei 225                          10,378.03

The Japanese equity markets climbed for a second straight day amid a weaker yen, leading the Nikkei 225 to gain 194.56 points (1.91%) and close at 10,378.03. All ten components traded higher on the day, with technology leading the way, adding 3.12%. Shares of Isuzu Motors, Japan’s largest maker of light-duty trucks, surged 6.83% as the company is seeking talks with General Motors to review a jointly operated engine-making factory in the U.S., while Nissan Motors, Japan’s third-largest automaker pushed 6.07% higher as the automaker along with Toyota Motor leads the gain in production among the nation’s carmakers in November as government incentives spur demand. Meanwhile, Fuji Electric Holdings leapt 8.22% subsequent to the Nikkei newspaper reporting that the electronic-devices maker will begin mass producing next-generation, power-saving semiconductors in the spring of 2011, while Japan Tobacco jumped 5.26% as the company due to Japan, the world’s fourth-largest cigarette market, plans to raise the price of tobacco taxes for the first time in four years due to the shortfall in tax revenue that the government faces, in addition to discouraging smoking.

Hang Seng                        21,092.04

Hong Kong shares halted a four day losing streak, leading the Hang Seng Index to advance 143.94 points (0.69%) and end the trade at 21,092.04 as four of the nine components traded higher on the day. Shares of Hang Lung Properties soared 5.67% as regulators look to tighten rules on how show apartments are displayed for new developments in order to prevent buyers from being misled, while Industrial & Commercial Bank of China, the world’s most profitable bank added 2.62% as Chairman Jiang Jianqing told reporters that the company does not have any financial needs in the short term. At the same time, Aluminum Corporation of China gained 1.21% on the back of higher commodity prices, while HSBC Holdings pushed 0.75% higher subsequent to the Office of Fair Trading announcing that it would drop an investigation into overdraft fees charged by banks after the U.K. Supreme Court ruled against it.

S&P/ASX 200 Index           4,704.20

Stocks in Australia traded to the upside on Tuesday, leading the S&P/ASX 200 to gain 69.10 points (1.49%) and close at 4,704.20. All ten components traded higher on the day, with financials leading the way, rising 1.76%, followed by a 1.70% gain in industrials. Shares of BHP Billiton, the world’s largest mining company, climbed 1.71% after the Age newspaper reported that the mining company may consider selling the remaining nickel assets in 2010 in order to raise approximately $3 to $7 billion, while Newcrest Mining gave back 2.07% on the back of lower gold prices. Meanwhile, Macquarie Group, Australia’s largest investment bank rose 1.94% as the bank is close to an agreement to purchase the derivatives division of Sal. Oppenheim Jr. & Cie., while, Murchison Metals advancing 5.61% after the iron ore producer reported a “significant” recourse increase at its Jack Hills project.

Notable Asian Session Event Risk / Economic Releases