BLBG; Asian Stocks Rise as China Tightening Concerns Ease; Won Drops
By James Regan and Shani Raja
May 24 (Bloomberg) -- Asian stocks rose, led by the biggest gain in China’s shares since November, on speculation Chinese policy makers will rein in efforts to cool the economy as Europe’s debt crisis threatens a global recovery. South Korea’s won hit an eight-month low on escalating tensions with the North.
The Shanghai Composite Index jumped 3.6 percent to 2,675.85 and the MSCI Asia Pacific Index rose 0.6 percent to 112.66 as of 4:08 p.m. in Tokyo. The Stoxx Euro 600 increased 1 percent to 239.41. Yuan forwards projected the least appreciation in eight months as China-U.S. talks began in Beijing. Futures on the Standard & Poor’s 500 Index slid 0.4 percent.
China’s importance as an engine of global economic growth is increasing as austerity measures needed to repair public finances in Europe damp spending. Chinese lenders have this year been ordered three times to set aside more funds as reserves and National Development and Reform Commission official Xu Lianzhong, writing in today’s China Securities Journal, urged caution in introducing new curbs.
“Any indication China will take a measured approach to controlling overheating in some sectors, rather than crushing economic activity generally, means people can start to check this big item off the ‘macro concerns’ list,” said Prasad Patkar, who helps manage about $1.7 billion in Sydney at Platypus Asset Management Ltd.
Standard Chartered Plc today revised its forecast for interest-rate increases in China this year to none, from two, and pushed back its forecast for when yuan appreciation will resume to late in the third quarter.
China Stocks
Just three of the 911 stocks in the Shanghai Composite Index declined. Hong Kong’s Hang Seng Index climbed 0.9 percent and the city’s Hang Seng China Enterprises Index of mainland companies rose 2 percent, rebounding from a three-month low.
China Vanke Co., the nation’s largest listed property developer, jumped 4.3 percent in Shanghai. Beiqi Foton Motor Co. paced gains by automakers, rising 6.9 percent after the Shanghai Securities News reported the government will extend subsidies for trade-in vehicles to the end of this year.
Twelve-month non-deliverable yuan forwards weakened 0.2 percent to 6.7501 per dollar in Hong Kong, reflecting bets the currency will strengthen 1.2 percent from the spot rate of 6.8277, according to data compiled by Bloomberg. The yuan has barely moved versus the dollar this year, while against the euro it has appreciated 15 percent.
Yuan Move ‘Unlikely’
“With all the volatility going on in financial markets and with the sharp rally in the yuan against most currencies, we think it’s unlikely for them to move anytime soon,” said Thomas Harr, a currency strategist at Standard Chartered in Singapore. “The window of opportunity is not there at the moment.”
China will “steadily advance the reform of the formation mechanism of the exchange rate,” moving gradually and independently, President Hu Jintao said as talks with the U.S. started in Beijing today. Treasury Secretary Timothy F. Geithner said allowing the yuan to reflect market forces is important to the Chinese economy.
Benchmark stock indexes in Taiwan, South Korea and Singapore, economies that count China as their No. 1 export market, all rose today. Trading resumed in South Korea and Hong Kong after May 21 holidays, while Thailand’s financial markets reopened for the first time since May 19 following anti- government riots.
The SET Index of shares dropped 2.4 percent as concern about the worst political violence in 18 years overshadowed a government report today showing the economy expanded at the fastest pace since 1995. Gross domestic product increased 12 percent from a year earlier in the first three months of 2010.
War Threat
South Korea’s won slid 1.7 percent from the close on May 20 to 1,214.65 per dollar, according to Seoul Money Brokerage Services. It earlier touched 1,220.75, the weakest level since Sept. 15. The cost of insuring the nation’s bonds increased 4.5 basis points to a nine-month high of 147 basis points, according to credit-default swap prices at CMA DataVision.
The government will seek United Nations Security Council action against North Korea and halt trade with its communist neighbor over the deadly torpedoing of one of its warships in March, which killed 46 sailors. North Korea shipping will also be banned from South Korean waters, President Lee Myung Bak said in Seoul today. North Korea last week threatened “all-out war” against any move to punish it, including any more UN sanctions.
“When the news broke about the sinking of the ship, that it had been a North Korean torpedo, it was basically the start” of the won’s slide, said Gerrard Katz, head of foreign-exchange trading at Standard Chartered in Hong Kong. “There’s big concern about that in the market. Risk appetite is pretty weak.”
To contact the reporter for this story: James Regan in Hong Kong Jregan19@bloomberg.net;
