Exporters and tech stocks shine as region turns bullish
Stock markets across the region rallied yesterday as the start of the fourth quarter prompted investors to rejig their portfolios in search of higher returns in the final three months of the year.
A positive report on US manufacturing helped bolster Asian exporters, while technology stocks - including lagging second-tier ones - edged up on the back of a surge in the Philadelphia Stock Exchange's semiconductor index and the Nasdaq on Friday.
The Hang Seng Index rose 1.82 per cent to its highest close in nearly seven months as property stocks attracted renewed buying interest after strong home sales and price increases for luxury real estate in the secondary market.
The strong market moves, which were spearheaded by broad gains in US and European markets on Friday, caught some investors on the wrong foot. That triggered short covering which helped accelerate the gains - particularly in Seoul, where the Korea Composite Index jumped 4.12 per cent, and in Hong Kong-listed H shares, which added 2.75 per cent.
Japan's Nikkei-225 Index rose 2.68 per cent - its biggest one-day advance in four months - and Taiwan, which has been a laggard, was not far behind. The Weighted Index rose 2.23 per cent and broke its 200-day moving average in the process.
'There is a lot of asset allocation going on right now and there is a lot of money moving out of the bond markets, which were one of the best-performing assets in the third quarter,' said Sheldon Lee, the head of hedge fund sales at CLSA. 'So fund managers are taking those gains and moving them into the equity markets.'
A modest retreat in the crude oil November futures to about US$49.50 a barrel in Asian trading boosted sentiment, but domestic factors played a key role for individual markets. Investors looked to a favourable Bank of Japan tankan report, speculation about an interest-rate cut in Korea and excess liquidity in Taiwan.
Adrian Mowat, a regional equity strategist at JP Morgan, said Asian and emerging markets had 'the right combination of availability of sustainable superior growth and good value' at the moment and projected a 'good end to the year' for regional markets.
Mr Mowat said the reflation trend and negative real rates would be key drivers but Asian earnings expectations for next year were also too modest.
'We might begin to see earnings expectations being revised higher and that will give a big boost to international investors,' he said.
Mr Lee is also bullish on equities in the region and noted investors were favouring riskier assets again.
'What is really encouraging is that everywhere around the world - not just Asia, but every single major market - keeps moving and that is more sustainable than if only one market moves,' he said.
