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Risk rally continues in Asia pacific markets on US Fed pledge

Source: Capital Market, Friday, January 27th, 04:17 PM

Asia Pacific stocks finished last session of the week slight above the neutral line, with the MSCI Asia Pacific index rose 0.2%, as investors continued hunting risky assets the Federal Reserve's pledge to keep interest rates at a record low until late 2014 and ready to offer additional stimulus. Furthermore, growing hopes for an agreement on debt relief for Greece, Chinese policy easing announcement during weekend, and stronger growth in the world's largest economy also supported risk sentiments.

But gains across the regional bourses were, however, modest as investors unwilling to hold more risky positions amidst unclear picture about Greece survival from its looming debt default and ahead of weekend.

The US Federal Reserve pledged to keep interest rates low until late 2014 to nurture the country's stubbornly slow economic recovery. The Fed cut rates to near zero in December 2008 during the financial crisis and has held them there ever since. The announcement that it expected rates to remain low was a sign that the Fed expects the US economy, which is improving, to need significant help for three more years. The Fed move could lift US economy as well as nurture global economy.

Market participants are expecting US economic growth will strengthen to around 3% in the quarter ended December 2011, from about 2% rise in the September quarter. The U.S. Commerce Department will announce fourth-quarter gross domestic product figures later today.

The resumption of talks on a crucial Greek debt relief deal heartened investors. Investors are hoping that Greece will complete negotiations on its debt swap deal by the end of the week. The creditors' representatives have said they aim to get a deal by Monday, when European leaders meet in Brussels.

Back to countries, the Australian market ended higher, with the benchmark All Ordinaries Index up by 0.4% on Friday, as appetite for risky assets improved after news that the US Fed was ready to offer additional stimulus. Gains were lead by shares of mining, industrials, and energy companies, while losses in retailers and consumer goods and technology stocks capped upside move.

Monadelphous Group advanced 3.6% to A$22.60 after announcing stronger earnings forecast for half year ended 31December 2011on Wednesday. Monadelphous stated revenue growth for the first half of the 2012 financial year would be at least 15% greater than the previous corresponding period and healthy margins would be maintained.

MND said sales revenue is expected to be around A$870 million, an increase of approximately 24% on the previous corresponding period. Net profit after tax is expected to be between A$55 million and A$58 million, representing an increase of between 21% and 27%. The strong revenue momentum is expected to continue, with approximately A$1.4 billion of new contracts announced in the first half of the 2012 financial year.

ResMed Inc surged 7.5% to A$2.73 after announcing robust half year ending December earnings result. ResMed said its revenue for the quarter ended December 31, 2011 was A$332.7 million, a 9% increase over the quarter ended December 31, 2010. For the quarter ended December 31, 2011, net income was A$62.9 million, an increase of 8%, compared to the quarter ended December 31, 2010. Diluted earnings per share for the quarter ended December 31, 2011 were A$0.42, an increase of 14% compared to the quarter ended December 31, 2010.

The Australian dollar appreciated against the US dollar on Friday on expectation foreign central bank and sovereign wealth funds willing to hold Australian dollar as they try to reduce their exposure to under-performing US and European currencies. Russia's central bank has flagged it may begin adding Australian dollars to its foreign currency reserves as early as February. At the time of writing, the Australian dollar buys at 1.0628 against the US dollar, off an intraday peak of 1.0686 early morning.

In New Zealand, New Zealand stocks wrapped last session of the week with positive note, with the NXZ50 index up by 0.4%, registering fourth gain out of five straight sessions in row as investors appetite for risky assets improved on prospect of globally low interest rates for an extended period. Meanwhile surge in the Australian market also gave a bit of confidence to the market.

Statistics New Zealand released merchandise trade data on Friday, showing that the New Zealand trade balance was a surplus of NZ$338 million in the month of December as exports of milk powder, butter and cheese reached records. The value of exports rose 13% to NZ$4.3 billion in December from the same month a year earlier, while imports fell 1.6% to NZ$4 billion.

In Japan, the Tokyo stockmarket finished last session of the week tad below the neutral line after fluctuating in and out of in the boundary line most of the juncture, as risk aversion mood spur by yen strength against major currencies and dovish statement from BOJ's board members. Adding to this, weak earnings forecast from NEC Corp, Nintendo Co, and Elpida further fueled selloff. the Nikkei Stock Average index declined 8.25 points, or 0.9%, at 8,841.22. For the week, the benchmark index added 0.9%.

Bank of Japan board members warned that strains in global financial markets fueled by sovereign debt problems in Europe will be prolonged and could tip the global economy into recession, the minutes of the BOJ's Dec. 20-21 policy meeting showed Friday. The minutes of the Bank of Japan's December meeting suggested that the central bank is open to further easing steps if the ongoing European sovereign debt crisis starts to weigh on Japan??s financial and economic conditions. As for the outlook, a few members commented that it was necessary for the bank to continue to make its utmost efforts to maintain financial market stability, bearing in mind the possibility of further disturbances in financial markets due to the worsening of the sovereign debt problems in Europe.

NEC Corp stumbled 7.1% to 156 yen after the computer maker forecast a full- year loss of 100 billion yen after earlier projecting a 15 billion yen profit, citing falling sales and restructuring costs for the change in outlook. The company also said it will cut 10,000 jobs.

Nintendo Co. fell 4.1% to 10,310 yen after the world's biggest maker of video-game consoles revised downgrade its annual loss forecast to 65 billion yen citing foreign-exchange losses and a consumer preference for gaming on the iPhone and iPad. The net loss in the year ending in March may be 65 billion yen, compared with an earlier forecast for a loss of 20 billion yen, Japan-based company said in a statement yesterday.

Elpida Memory closed down 7.1% at 338 yen on reports that the company is likely to announce an operating loss of 90 billion yen for the April-December period, a sharp reversal from the 41 billion yen profit it posted the year before.

The Ministry of Internal Affairs and Communications released CPI data on Friday, showing that Japan's core consumer prices fell 0.1% on year in December, posting the third straight drop as global demand slows and the strong yen keeps import costs down. For the whole of 2011, the core CPI fell an average 0.3%, marking a third straight year of price drops, following declines of 1.0% in 2010 and 1.3% in 2009.

Meanwhile, data from the Ministry of Economy, Trade and Industry said that retail sales in Japan were up 2.5% to13.049 trillion yen in December from a year earlier following a 2.2% drop in November. On a seasonally adjusted monthly basis, retail sales collected 1.8% following the 2% contraction a month earlier.

In Hong Kong, the benchmark Hang Seng index rose by 0.3% at 20,501.67, registering sixth session of consecutive winning streak, as investors sought for risky assets on expectation of China policy easing announcement during weekend. Li & Fung was up 3.4% to HK$18.40 after accepting the offer to acquire all issued shares of Hang Ten in respect of about 724 million shares, representing about 73.7% of the issued share capital.

In Singapore, late afternoon rally on the Singapore stockmarket pushed the Strait Time index by 0.75% higher from prior day to close at 2,196.26 on Friday, January 27, 2012, registering fifth successful session in row, as appetite for risky assets improved on growing hopes for an agreement on debt relief for Greece, Chinese policy easing announcement during weekend, and stronger growth in the world's largest economy

Singapore banks ended higher, with OCBC added 0.9% to S$8.59, DBS 0.9% to S$13.46, and UOB 1% to S$17.40. Realty developers closed up, with City Development climbed up 1.9% to S$10.16, SP Land 0.5% to S$5.84, HK Land 1.3% to US$5.35, and Capitaland 1.1% to S$2.65. Commodity traders were up, powered by surge in CRB index overnight. Olam International grew 0.4% to S$2.64 and Noble Group 2.6% to S$1.375. Palm oil producers climbed up on tracking gain in crude palm oil future prices in the Kuala Lumpur Derivative Exchange. Willmar International advanced 0.6% to S$5.45 and IndoAgri Resources 1.4% to S$1.47.

In India, the BSE benchmark Sensex ended 0.92% higher at 17,234, extending gains for the fourth straight session on continued buying by funds and retailers amid a firming trend in Asian markets. On the sectoral front, BSE Oil & Gas, Consumer Durables and Metal indices leading the gains, ended up by around 2-3%. BSE Realty, FMCG and Bankex indices were ended in the red.