Asian shares up on record Wall St. close: China data

Reuters: Asian shares edged higher on Wednesday after Wall Street closed at a record high overnight and Chinese trade data signalled a recovery in the world’s second largest economy was gathering strength, while the Yen remained under pressure.

China recorded a mild trade deficit of US$ 884 million in March as imports surged way ahead of market expectations, growing 14.1% year on year, while annual export growth of 10% were largely in line with forecasts.

The trade data indicated China’s economic recovery remained on track, a day after an inflation report suggested policymakers could hold to an accommodative monetary policy for a while longer in order to help regain momentum in growth.

JP Morgan in Hong Kong Chief China economist Haibin Zhu said the surge in imports in March could help dispel a major concern over trends in domestic demand that had been prompted by weakness of import growth in previous months.

“So the stronger than expected import growth for March, suggest this cycle is probably coming to a turning point,” Zhu said. “If domestic demand turns out to be stronger than expected, it’s definitely positive for the economic outlook.”

The MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.4% after rising 1% the day before. The Dow Jones industrial average closed at a record high on Tuesday on hopes for better corporate earnings.

Australian shares lagged with a 0.29% drop, with a retreat in financials offsetting a rally in miners driven by higher iron ore prices as investors switched out of banks into miners on stronger iron ore prices. The Australian Dollar hit a 2½-month high of US$ 1.0518 after the Chinese data. China is Australia’s largest trading partner.

Seoul shares rose 0.7%, with investors torn between hopes for the country’s central bank to cut interest rates when it meets on Thursday and concerns about signs North Korea was preparing for a missile launch.

North Korea’s belligerence has raised concerns in the region about the spreading geopolitical risks and has limited buying of equities in recent sessions.

In Japan, the Nikkei stock average climbed 0.8%, approaching Tuesday’s near five-year highs, as the Bank of Japan’s aggressive monetary easing stimulus boosted hopes for better corporate earnings as it has pushed the Yen sharply lower against major currencies.

“The sharp advances of the Nikkei over the last five months should not necessarily be a warning sign of speculative bubble. The Nikkei may merely be playing catch up,” City Index chief global strategist Ashraf Laidi said in a note to clients.

He noted that the Nikkei was up 89% from its low of October 2008 while the Standard and Poor’s Index (S&P) has risen 133% from its low of March 2009.

The S&P hit an all-time high last month while the Nikkei at around 13,280 currently is still only about a third of its lifetime high hit in December 1989.

“Nikkei’s 14,000 level stands as the near term barrier, coincides with the interim low of June 2006 and above the high of May 2001. As the long as the index avoids a close below 11,820 this month or 12,550 next month, the road to 14,500, appears intact,” Laidi said.

The Yen remained under pressure after falling to multi-year lows on Tuesday, when the Dollar hit 99.67 Yen, its highest since May 2009, while the Euro climbed as far as 130.09 Yen, its highest since January 2010.

The Aussie Dollar also soared to 104.35 Yen, the highest since July 2008, on Tuesday. The Dollar was at 99.03 Yen and the Euro traded at 129.57 Yen, while the Aussie was at 104.07 Yen.

The Euro was steady against the Dollar at US$ 1.3085, after touching a 3½-week high of US$ 1.3103 on Tuesday.

“The BoJ’s recent policy action will undoubtedly lead to the Japanese picking up their offshore search for yield. We are looking closely for signs of where the wall of Japanese money may be heading next,” Westpac said in a research note.

A rise in Tokyo gold futures, which rose as high as 5,076 Yen per gram, just below its record high of 5,081 Yen hit in February, was seen as a reaction to the BOJ’s aggressive expansionary measures and the yen’s weakness.

“The BOJ’s steps may be waking up Japanese investors to the need to hedge against the risk of inflation,” financial research firm Market Strategy Institute managing director Koichiro Kamei said, adding that gold could also act as a hedge against further falls in the Yen.

The US crude futures eased 0.3% to US$ 93.88 a barrel while Brent was 0.01% up at US$ 106.24.

In other parts of Asia, the Philippines said its exports in February fell 15.6% from a year earlier, the steepest drop in 14 months, on weakening demand for the country’s main electronics shipments from its traditional markets in the West and regional neighbours.