China policy hopes, copper stocks boost Asia markets

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By V. Phani Kumar, Shri Navaratnam & Philip Vahn

HONG KONG (MarketWatch) -- Asian markets rose Monday as resource stocks advanced after a massive earthquake in Chile raised fears of disruption in copper supplies.

Investor sentiment was also helped by the general easing in concerns over fiscally-strapped Greece, after The Wall Street Journal reported over the weekend that a plan led by Germany and France to bail out Greece with aid of as much as 30 billion euros ($41 billion) has begun to take shape. But the timing and terms of any rescue were unclear.

"Markets remain in two minds at the moment. Greece is never far from the headlines, but recent reports of the EU putting together a rescue plan have been greeted positively," said Khoon Goh, senior economist at ANZ in Wellington.

Hong Kong's Hang Seng Index advanced 2.2% to 21,056.93, China's Shanghai Composite added 1.2%, Australia's S&P/ASX 200 climbed 1.1%, Japan's Nikkei 225 added 0.5% and Taiwan's Taiex rose 1.9%.

Dow Jones Industrial Average /quotes/comstock/10w!i:dji/delayed (INDU 10,402, +76.41, +0.74%) futures were up 59 points in screen trade. Markets in South Korea, India and Thailand were closed for public holidays.

The strong gains in Hong Kong and Shanghai shares came despite data showing a slowdown in Chinese manufacturing activity, on expectations Beijing may retain its growth-accommodative policy focus at the upcoming meeting of the National People's Congress, beginning this weekend.

"We believe the NPC will reaffirm the government's twin goals of ensuring sustainable economic growth and ensuring price stability," CIMB analyst Pauline Loong wrote in a report.

Chinese banking and property stocks soared during the session in Hong Kong, with Bank of China /quotes/comstock/11i!bachy (BACH.Y 12.77, +0.54, +4.42%) /quotes/comstock/22h!e:3988 (HK:3988 3.92, +0.15, +3.98%) rising 4%, Industrial & Commercial Bank of China /quotes/comstock/22h!e:1398 (HK:1398 5.77, +0.28, +5.10%) jumping 5.1% and Agile Property Holdings /quotes/comstock/22h!e:3383 (HK:3383 10.72, +0.80, +8.06%) /quotes/comstock/11i!agpy.y (AGPY.Y 63.89, +0.78, +1.24%) jumping 8.1%. In Shanghai, China Citic Bank Corp. /quotes/comstock/28c!e:601998 (CN:601998 7.10, +0.17, +2.45%) /quotes/comstock/11i!chbjf (CHBJF 0.70, +0.02, +2.19%) added 2.5% and China Merchants Bank /quotes/comstock/28c!e:600036 (CN:600036 16.27, +0.40, +2.52%) /quotes/comstock/11i!cihkf (CIHKF 2.10, +0.13, +6.60%) climbed 2.5%, while China Life Insurance /quotes/comstock/13*!lfc/quotes/nls/lfc (LFC 68.17, +1.71, +2.57%) /quotes/comstock/28c!e:601628 (CN:601628 27.84, +0.92, +3.42%) gained 3.4%.

Earlier in the day, two separate indicators of Chinese manufacturing activity showed a slowdown in China's manufacturing activity in February. China Federation of Logistics and Personnel's purchasing manager's index for the month fell to 52, well below January's 55.8. Separately, the HSBC China manufacturing purchasing managers index, a gauge of nationwide manufacturing activity, also fell to 55.8 in February from 57.4 in January, snapping four straight months of gains.

Metal producers shot higher across the region despite China's PMI data. The rally came in the wake of a massive earthquake in Chile, the world's largest copper producing country, on Saturday.

"Chile is to copper what the Middle East is to oil," said ANZ senior commodity strategist Mark Pervan.

Jiangxi Copper /quotes/comstock/11i!jixay (JIXA.Y 86.00, +3.67, +4.46%) /quotes/comstock/28c!e:600362 (CN:600362 38.54, +3.50, +9.99%) and Yunnan Copper /quotes/comstock/28b!e:000878 (CN:000878 28.05, +2.55, +10.00%) jumped by the daily 10% limit on Chinese bourses, with Rio Tinto /quotes/comstock/13*!rtp/quotes/nls/rtp (RTP 210.34, +2.54, +1.22%) /quotes/comstock/22x!e:rio (AU:RIO 71.40, +0.90, +1.28%) rising 1.3% and OZ Minerals /quotes/comstock/11i!ozmly (OZML.Y 4.73, -0.02, -0.42%) /quotes/comstock/22x!e:ozl (AU:OZL 1.10, +0.06, +5.29%) climbing 5.3% in Sydney, and Pacific Metals /quotes/comstock/!5541 (JP:5541 668.00, +18.00, +2.77%) gaining 2.8% in Tokyo.

March copper futures were up 11.40 cents, or 3.5%, to $3.382 a pound on Globex.

"Power and fuel disruptions could take a week or so to address. Copper is likely to go for a run today but the reality is that there's a huge quantity of copper on the LME," said UBS analyst Tom Price, referring to LME copper stocks of 549,725 tons.

Australia & New Zealand Banking Group's /quotes/comstock/22x!e:anz (AU:ANZ 23.59, +0.45, +1.94%) /quotes/comstock/11i!anzby (ANZB.Y 21.23, +0.51, +2.46%) shares rose 1.9% in Sydney, supporting banking stocks, after UBS upgraded the stock to Buy from Neutral. Friday, the lender reported a strong 16% rise in underlying profit for the first four months of its financial year. Among others, Westpac Banking Corp. /quotes/comstock/22x!e:wbc (AU:WBC 26.53, +0.40, +1.53%) /quotes/comstock/13*!wbk/quotes/nls/wbk (WBK 119.51, +2.39, +2.04%) rose 1.5%, while National Australia Bank /quotes/comstock/11i!nabzy (NABZ.Y 22.92, -0.08, -0.35%) /quotes/comstock/22x!e:nab (AU:NAB 25.61, +0.17, +0.67%) climbed 0.7%.

Financials also advanced in Tokyo after JPMorgan raised its ratings of some of the country's major banks. Mizuho Financial Group /quotes/comstock/13*!mfg/quotes/nls/mfg (MFG 4.00, +0.10, +2.56%) /quotes/comstock/!8411 (JP:8411 177.00, +5.00, +2.91%) climbed 2.9%, Sumitomo Mitsui Financial Group /quotes/comstock/11i!smfjy (SMFJ.Y 3.21, -0.02, -0.62%) /quotes/comstock/!8316 (JP:8316 2,888, +32.00, +1.12%) rose 1.1% and Mitsubishi UFJ Financial Group /quotes/comstock/13*!mtu/quotes/nls/mtu (MTU 5.17, +0.05, +0.98%) /quotes/comstock/!8306 (JP:8306 456.00, +7.00, +1.56%) advanced 1.6%.

In Taipei, memory chip makers advanced after the Economic Daily News reported dynamic random access memory market will likely face a supply shortage from the second quarter, with the supply-demand gap possibly reaching 10% by the second half of the year. Nanya Technology Corp. soared 6.9%, with Inotera Memories climbing 6.8%.

Elsewhere in the region, New Zealand's NZX 50 rose 0.3% and Philippine shares ended 1.1% higher, while Singapore's Straits Times Index rose 0.9% and Indonesian stocks added 0.1% in afternoon trading.

In foreign exchange trading, the euro rose to $1.3624 from $1.3616 late in New York Friday, and to 121.67 yen from 121.00 yen. The dollar was buying 89.28 yen from 88.86 yen.

Greg Gibbs, a currency strategist at RBS in Sydney, believes the euro has been oversold and a short-covering rally was a possibility. "We continue to see euro at risk of a stop-loss run higher that could take it as far as $1.40. This appears to be more likely with less fear of Greek default on Friday and reports over the weekend that financial aid is likely," Mr. Gibbs said.

Japanese government bonds were lower on the Nikkei's rise with March futures down 0.10 at 139.77 points, and the 10-year cash yield was up 1.5 basis points at 1.310%.

Spot gold was at $1,120.90 a troy ounce, up $3.00 from the New York close Friday. April Nymex crude-oil futures were up 79 cents at $80.45 per barrel on Globex.

Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau.