INO.com News - DJ Asian Shares End Higher As Dubai Fears Fade; Financials Rise (djn)

DJ Asian Shares End Higher As Dubai Fears Fade; Financials Rise

SINGAPORE (Dow Jones)--Financial stocks were among the biggest winners in a broad Asian stock market rally Monday following Friday's sharp selloff, as investors found refuge in reassurance by the United Arab Emirates' central bank that it would support local and international banks with exposure to Dubai debt.

"Across Asia, regional markets have rebounded strongly this Monday as the United Arab Emirates' central bank pledged support for the country's local and foreign banks, in turn easing fears of contagion," said Ben Potter, a research analyst at IG Markets in Melbourne, in a note to clients.

Also, traders have come to the realization that "the Dubai event, while serious, is not the beginning of a new phase of debt deflation greater than the real-estate crisis that started in 2007," said Richard Hastings, a consumer strategist at Global Hunter Securities.

Japan's Nikkei 225 closed up 2.9%, Australia's S&P/ASX 200 rose 2.8% and South Korea's Kospi Composite climbed 2.0%. Hong Kong's Hang Seng Index added 3.3% and China's Shanghai Composite tacked on 3.2%.

India's Sensex climbed 2.1%, also helped by data showing the Indian economy grew 7.9% from a year earlier in the July-September quarter, driven mainly by the manufacturing and services sectors.

The growth was more than the 6.1% expansion in the previous quarter and sharply higher than the median 6.3% forecast in a Dow Jones Newswires poll of 13 economists.

India's surprisingly strong GDP has raised chances of a rate hike before the end of December, said Robert Prior-Wandesforde, senior Asian economist at HSBC. "We believe this to be the biggest rise the Indian economy has seen since the quarterly data began in 1996. An extraordinary result and one which will no doubt make the RBI sit up and take notice," Wandesforde said, though he's still sticking to the house's call for rate hikes to start in January.

Singapore's Straits Times Index was down 1.1%, however, playing some catchup on the downside after being closed for a holiday Friday.

Most financial stocks in the region advanced, rebounding from Friday's selloff. In Hong Kong, HSBC rose 4.3% after ending Friday down 7.6%. In Australia, National Australia Bank added 6.0%, while in Japan, Mitsubishi UFJ Financial Group rose 8.6%. In South Korea, Woori Finance Holdings surged 9.4% after dropping nearly 16% over Thursday and Friday combined.

"Investors are figuring out that...Asian bankers/brokers have very little exposure to the $60 billion default" in Dubai, said Tony Sagami, editor of Asia Stock Alert.

Bucking the trend, Singapore's banks lost ground in late afternoon trading, led by a 2.3% decline in DBS Group Holdings, on concerns the lender may have the most exposure to Dubai's debt woes. "Among Singapore banks, DBS is the only bank known to have direct lending exposure to the Middle East," CIMB said in a report after downgrading the stock to underperform from neutral.

Shares of real-estate operator Sumitomo Realty & Development jumped 9.1% in Tokyo. Real-estate developers Gemdale Corp. climbed 2.7% and Poly Real Estate Co. rose 2.2% in Shanghai.

Chinese shares saw added support after Beijing late Friday said it will maintain an active fiscal policy and moderately loose monetary policy next year, allaying investor concerns over a tightening policy bias. This "may indicate that Beijing wants to boost investor sentiment, especially amid continued uncertainty in the global economy," said Guosen Securities analyst Wang Junqing.

In Hong Kong, new listing Sands China fell 10.2% on its debut. The casino operator's "aggressive expansion plan has resulted in heavy indebtedness, and coupled with its unattractive valuation I think the stock will remain underperforming in the near-term," said Ernie Hon, a strategist at ICBC International.

Among other markets, New Zealand's NZX-50 finished 1.0% higher and Taiwan's Taiex added 1.2%. In late afternoon trading, Thailand's SET index was up 1.1% and Indonesian shares were up 0.9%. Philippine markets were closed.

Still, some Asian markets, including China and Japan, had yet to recoup all of Friday's losses, suggesting that some investors remain wary -- possibly because of ongoing concerns over U.S. dollar weakness. "The more serious issue for equities right now is the 2009-2010 yen super bull, and the extreme weakness of the (U.S. dollar) against the (Japanese yen)," said Global Hunter Securities' Mr. Hastings.

The U.S. dollar recently traded at 86.16 yen, down from 86.75 yen on Friday. Still, Japanese exporters, which have been hard hit by recent strength in the yen, got some relief as the U.S. dollar managed to stay above the 14-year low versus the yen seen Friday. Toyota Motor rose 4.2% and Sony closed up 2.7% in Tokyo.

Higher-yielding currencies retraced some losses after last week's selling triggered by the Dubai debt woes. The euro was up against the U.S. dollar at 1.5046 from 1.4955 late Friday in New York following the decision by U.A.E.'s central bank to provide additional liquidity to banks there. After rising against the yen earlier Monday it was recently down at 129.61 yen from 129.71 yen Friday.

"The market welcomed the [U.A.E. support] news as the Dubai shock last week was definitely bad for the euro," Barclays Capital senior trader Motonari Ogawa said.

Lead December Japanese government bond futures ended slightly lower as demand for safe-haven assets weakened due to firmer stocks and a more stable foreign-exchange market. Lead December JGB futures were down 0.08 at 139.74 points. The yield on the 10-year bond rose 1.5 basis points to 1.260%.

Spot gold traded at $1,170.30 per troy ounce, down $6.40 from the New York close. January crude oil futures were up 60 cents at $76.65 per barrel on Globex.

-Dow Jones Newswires; +65-6415-4140; markettalk@dowjones.com

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(END) Dow Jones Newswires

November 30, 2009 04:35 ET (09:35 GMT)