China Stocks Lead Asia, As Japan Pulls Back

Most Asian markets advanced Monday after a corporate-results-driven rally on Wall Street and amid a positive earnings outlook for Chinese firms, although Japanese stocks fell from near three-year highs as investors took profit.

The Shanghai Composite Index  jumped 1.6% to 2,328.71, while Hong Kong’s Hang Seng Index  climbed 0.5%, and Taiwan’s Taiex  gained 0.4%.

Japan’s Nikkei Stock Average  briefly topped 11,000, reclaiming the milestone for the first time since April 2010, before retreating as profit-taking kicked in. The benchmark was down 0.5% at 10,871.37 in early afternoon trading in Tokyo.

The Kospi  also shed 0.5% in Seoul, while markets in Australia were closed for a holiday.

The advances for Chinese shares came amid a relatively positive earnings outlook, even as data released Sunday showed profit at major Chinese industrial enterprises grew by only 5.3% in 2012, nearly one-fifth of the 25.4% jump seen the previous year.

A 17.3% jump in December profits, fueled by better earnings momentum in the last quarter of the year, helped improve the latest annual figure.

Lu Ting, a China economist at Bank of America Merrill Lynch, said the current momentum could lift earnings growth to around 25% in the first half of 2013, before moderating in the second half of the year, although the fluctuations in profitability could affect market movements.

“The wild swing of industrial enterprises’ earnings growth could lead to even bigger movements of stock markets on simplistic extrapolation. Investors’ confidence could be overly dampened during the downturn, but might also show irrational exuberance during the earnings upturn,” Lu said.

The broad regional gains came as improved profits at Procter & Gamble Co. and other firms on Friday pushed the Dow Jones Industrial Average  higher for the 11th time in 12 sessions and lifted the S&P 500 index  to its first finish above 1,500 since late 2007.

In Asian trading Monday, Dow industrials futures were up 0.1%, or 17 points, at 13,829, while S&P 500 futures climbed 0.1% to 1,496.80.

Stock movers

Automobile, construction and financial stocks were among the major gainers on mainland Chinese bourses.

Developer Beijing North Star Co.   climbed by the day’s 10% limit, and China Minsheng Banking Corp.   added 5.4% in Shanghai. In Shenzhen, Guoyuan Securities Co.  gained 4.7% and Chongqing Changan Automobile Co. advanced 4.7%.

Shanghai-traded shares of Dongfeng Automobile Co. rose 8.1% following news that Swedish truck maker Volvo AB is planning a joint venture with the Chinese firm to produce heavy vehicles.

Aviation-related stocks also jumped following reports that a home-grown Chinese army-transport aircraft completed its maiden flight over the weekend. China Aerospace Times Electronics Co. rose 5.8% in Shanghai, while AVIC Aircraft Co.   soared by the day’s 10% limit in Shenzhen.

The Hong Kong-listed shares of China Minsheng  and Beijing North Star  added 2.4% and 7.4%, respectively.

Also supporting the market rally, consumer-products firm Hengan International Group Co.  rose 3%, China Resources Land Ltd.   climbed 2.2%, and heavyweight HSBC Holdings PLC   improved by 1.1%.

On the downside, however, shares of shipping major China Cosco Holdings Co.   tumbled 5.8% after warnings of a “significant net loss” for 2012.

Shares of Huaneng Power International Inc.   slipped 0.3% in Shanghai and 0.6% in Hong Kong despite saying that it expects its 2012 profit to spike more than four-fold from the previous year, as the preliminary results were below market expectations.

Japan locks in gains

Over in Tokyo, the market appeared to take a pause after a strong rally over the past several weeks.

Still, many exporters extended their gains as the U.S. dollar straddled the 91-yen level, after dropping as low as ¥90.80 earlier in the day. The greenback  was buying ¥91.01 in Tokyo afternoon trading, up from ¥90.94 in New York late Friday.

Earlier on Monday, the Japanese government said the domestic economy would expand 2.5% in the year beginning April 1, sharply higher from an estimated 1% in the current financial year.

Among the gainers, Nissan Motor Co. jumped 3.2%, Sony Corp.  soared 8.4%, and Fuji Heavy Industries Ltd.   added 0.7%.

SMK Corp.  jumped 13.9% after the electronic-component maker forecast a smaller loss forecast for the year ending March 31.

Still, the recent gains for the Japanese market prompted some profit taking.

Shares of shipping firm Kawasaki Kisen Kaisha Ltd.   fell 3.1%, Yamaha Motor Co.   lost 0.7%, and Toshiba Corp.   slipped 0.5%. The stocks are still up between 14% and 20% so far in January.

Shares of Fanuc Corp.   tumbled 6.5% after the industrial-robot maker cut its full-year profit outlook.

Major South Korean exporters suffered further declines amid worries about the impact from stronger Japanese competition as the yen extends its fall.

Kia Motors Corp.   lost 3.3% and Hyundai Motor Co.   shed 1.7%, while heavyweight Samsung Electronics Co.  dropped 2.6%.

Marketwatch