(Economic Times 24th April 2008)
Asian shares got a lift on Thursday after a stamp duty cut to slash dealing costs gave the flagging Shanghai index a boost, while a modest dollar rebound supported exporters and kept oil prices from bubbling over. But investors, still anxious about rising inflation in Asia, were daunted by the soaring price of rice, which hit a record high. Asian equity markets made a cautious and slightly negative start to the day until the Shanghai Composite Index opened up 8 percent on the strength of a cut in stamp tax, to 0.1 percent from 0.3 percent. The Shanghai market has fallen by 51 percent from its October peak, dragged down by high inflation, the possibility of an economic slowdown this year and heavy supplies of fresh equity, and analysts said the tax change could fuel a 20 percent bounce. Shanghai's surge, which drove some stocks such as China Life Insurance to their 10 percent daily limits, injected some optimism into Japan's Nikkei average, which was up 0.4 percent by 0200 GMT. Tokyo traders were cautious as the company earnings season got into full swing, with steelmaker JFE Holdings Inc and Nintendo Co Ltd among major firms due to announce results later in the day. "The market trend has been upward, but investors cannot yet commit fully to buying," said Kenichi Hirano, operating officer at Tachibana Securities. "There are also earnings ahead. Today and tomorrow will be the first peaks of the season. As the stock market's initial gloom lifted, the appetite for Japanese government bonds waned. The yield on two-year notes, already lacking buyers ahead of an auction of the same maturity, hit a four month high of 0.700 percent. Shares across the rest of Asia were up 0.6 percent, with Sydney's benchmark S&P/ASX 200 index off by 0.9 percent, backtracking after a two-month closing high in the previous session, when a rare spell of banking optimism drove the index up 1.6 percent. "The banks are cheap and offer good dividend. However, there are still a number of problems that are coming up from the credit crunch that we may have not seen yet," said Adnan Kucukalic, equity strategist at Credit Suisse First Boston. "Until all that uncertainty has cleared up, we can't really see a sustained outperformance for the banks." Stocks also gained from the dollar's continued resilience, with the euro under pressure ahead of German corporate sentiment data, which may give further clues on the health of the economy in the euro zone. The euro, which this week hit $1.60 for the first time, slid to $1.585, depressed by soft economic data and comments from European policymakers indicating that the weaker US currency was hurting euro zone economic growth. "The euro is taking a breather after its sharp rise against the dollar this week, and it may see a little more correction if today's German data is weak," said Kengo Suzuki, a currency strategist at Shinko Securities. The dollar also rose against the yen to 103.5 yen.
Asian shares got a lift on Thursday after a stamp duty cut to slash dealing costs gave the flagging Shanghai index a boost, while a modest dollar rebound supported exporters and kept oil prices from bubbling over. But investors, still anxious about rising inflation in Asia, were daunted by the soaring price of rice, which hit a record high. Asian equity markets made a cautious and slightly negative start to the day until the Shanghai Composite Index opened up 8 percent on the strength of a cut in stamp tax, to 0.1 percent from 0.3 percent. The Shanghai market has fallen by 51 percent from its October peak, dragged down by high inflation, the possibility of an economic slowdown this year and heavy supplies of fresh equity, and analysts said the tax change could fuel a 20 percent bounce. Shanghai's surge, which drove some stocks such as China Life Insurance to their 10 percent daily limits, injected some optimism into Japan's Nikkei average, which was up 0.4 percent by 0200 GMT. Tokyo traders were cautious as the company earnings season got into full swing, with steelmaker JFE Holdings Inc and Nintendo Co Ltd among major firms due to announce results later in the day. "The market trend has been upward, but investors cannot yet commit fully to buying," said Kenichi Hirano, operating officer at Tachibana Securities. "There are also earnings ahead. Today and tomorrow will be the first peaks of the season. As the stock market's initial gloom lifted, the appetite for Japanese government bonds waned. The yield on two-year notes, already lacking buyers ahead of an auction of the same maturity, hit a four month high of 0.700 percent. Shares across the rest of Asia were up 0.6 percent, with Sydney's benchmark S&P/ASX 200 index off by 0.9 percent, backtracking after a two-month closing high in the previous session, when a rare spell of banking optimism drove the index up 1.6 percent. "The banks are cheap and offer good dividend. However, there are still a number of problems that are coming up from the credit crunch that we may have not seen yet," said Adnan Kucukalic, equity strategist at Credit Suisse First Boston. "Until all that uncertainty has cleared up, we can't really see a sustained outperformance for the banks." Stocks also gained from the dollar's continued resilience, with the euro under pressure ahead of German corporate sentiment data, which may give further clues on the health of the economy in the euro zone. The euro, which this week hit $1.60 for the first time, slid to $1.585, depressed by soft economic data and comments from European policymakers indicating that the weaker US currency was hurting euro zone economic growth. "The euro is taking a breather after its sharp rise against the dollar this week, and it may see a little more correction if today's German data is weak," said Kengo Suzuki, a currency strategist at Shinko Securities. The dollar also rose against the yen to 103.5 yen.
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