By SHRI NAVARATNAM and WEI-ZHE TAN in Singapore and V. PHANI KUMAR in Hong Kong
Asian equity markets advanced Tuesday, with South Korean shares ending at their highest level in more than three years as Hyundai Heavy Industries led shipbuilders higher on a big new order. Metal and energy sector shares advanced in several markets as a weakened U.S. dollar boosted commodity-related shares.
Japan's Nikkei Stock Average and Australia's S&P/ASX 200 each climbed 0.2%, Taiwan's Taiex ended flat and South Korea's Kospi advanced 0.6% to 2,009.05—its first finish above 2,000 points since November 2007. Hong Kong's Hang Seng Index added 0.5%, while China's Shanghai Composite climbed 0.1%, after weaving into and out of losses in the wake of Monday's 2.9% jump.
"The market's sharp gains yesterday were driven by pent-up demand following milder-than-expected policy tightening [by China's central bank]," said Zhuo Xiangyu, an analyst at China Securities Information. "But many people are still concerned about potential further policy-tightening in the near term, so [overall] the investment [mood] tends to be rather cautious."
Beijing raised banks' reserve requirement ratio by 0.5 percentage point Friday, but refrained from an interest-rate increase despite a sharp increase in monthly inflation. The restraint in tightening, in addition to boosting Shanghai-traded stocks, also helped to support commodity prices and stocks on Wall Street overnight.
More recently, Dow Jones Industrial Average futures were one point higher in screen trade.
Tuesday in Asia, commodity-related stocks were among the best performers, with Newcrest Mining rising 1.7% and Woodside Petroleum gaining 1.4% in Sydney, Inpex adding 2.6% in Tokyo, Korea Zinc advancing 3.9% in Seoul and Cairn India rising 2.3% in Mumbai trading. Shares of PetroChina rose 0.6% and Zijin Mining Group added 1% in Hong Kong, while Jiangxi Copper added 1% in Shanghai.
"Gold is back above the $1,400 level again, so this could cheer the mining sector, whilst the conservative measures in Beijing over policy tightening are again helping fuel crude's move higher and a sustained breach of the $90 market would be the next big level," said Ben Potter, market strategist at IG Markets.
Spot gold prices stayed above the $1,400 per troy ounce in Asian trading, and were recently at $1,403.20, up $8.70 from their New York closing level Monday. January Nymex crude-oil futures were up three cents at $88.64 per barrel on Globex.
Shipbuilding stocks jumped in Seoul after Hyundai Heavy Industries said it received a $1.45 billion order from German liner Hapag-Lloyd AG to build four container ships.
Hyundai Heavy surged 8.9%, Samsung Heavy Industries climbed 5.7% and STX Pan Ocean jumped 8.3%.
Woori Finance Holdings fell 4.6% on worries that the government's efforts to sell its 57% stake in the firm may falter after South Korean groups that had shown interest in the stake said late Monday that they were dropping out of the sales process.
Stock gains in Tokyo were constrained as the yen's overnight strength against the U.S. dollar dragged down some exporters. Shares of Canon fell 0.5% and Sony declined 0.6%.
"We are seeing a temporary market correction on the back of a stronger yen, combined with a pre-existing sense of overheating," says Yutaka Miura, a senior technical analyst at Mizuho Securities. He said investors are turning their attention to the U.S. Federal Reserve's policy-setting meeting later in the global day and the Bank of Japan's quarterly tankan survey early Wednesday.
In Sydney, AGL Energy fell 4.9% after confirming that it hasn't acquired any of several key electricity assets being privatized by Australia's New South Wales state.
Elsewhere in the region, New Zealand's NZX 50 finished 0.1% lower and Philippine stocks finished 0.8% higher. In afternoon trading, India's Sensex was up 0.6%, Singapore's Straits Times Index and Indonesia's JSX Index were flat and Thailand's SET was 0.4% higher.
The U.S. dollar declined against major currencies as investors awaited the outcome of the Fed's meeting Tuesday morning in Washington. The dollar was also weighed down by a fall in U.S. Treasury yields Monday and by a Moody's Investors Service report that the U.S. government's proposed tax package increases the chance of a negative outlook being placed on the U.S.'s triple-A rating in the next two years.
"The Fed's comments around [bond] purchases and the recent improvement in the U.S. economic outlook will be critical to whether the U.S. dollar can continue to rally," said Mike Jones, a currency strategist at the Bank of New Zealand. "Should the Fed indicate it is now less likely to fully implement its [quantitative easing] plans, we wouldn't be surprised to see U.S. bond yields extend their recent gains."
The dollar was at 83.28 yen from 83.39 yen late Monday in New York. The euro was fetching $1.3432 from $1.3393, and 112.18 yen from 111.69 yen.
Lead Japanese government bond futures were up 0.20 at 139.15 points, spurred by U.S. Treasurys' gains Monday, while the yield on 10-year cash JGBs was flat at 1.245%.
