Hong Kong: Asian stocks climbed to a fresh 10-month peak on Friday, with Hong Kong vaulting back to levels last seen before the collapse of Lehman Brothers as investors rushed into equities following upbeat corporate earnings around the world.
But gains were limited and higher-yielding currencies lost ground as some investors moved to book profits on the run-up this week, with some technical signals flashing warning signs that the risky asset surge may be due for a reversal.
After the US closing bell, Microsoft Corp, Amazon.com Inc and American Express posted disappointing quarterly results, sending their stocks lower. S&P futures were down slightly in Asia.
Hong Kong’s Hang Seng index pushed above the 20,000 mark at the start of trade to hit its highest since early September last year, making Asian markets among the first to retake levels last seen before Lehman’s demise.
The yen clawed higher on a dip in the Australian and New Zealand dollars, which retreated along with oil prices and other commodities. Copper prices recoiled from a nine-month high.
South Korea reported its economy expanded at its fastest pace since 2003 in the second quarter, nudging bonds lower and buoying stocks.
South Korea’s Samsung Electronics, the world’s top maker of memory chips and LCD screens, reported its best quarterly profit in 2-“ years. Samsung’s shares edged up 0.7%, outperforming the 0.4% rise in Seoul’s benchmark Kospi index.
“Gains are not so robust as markets have been on uninterrupted gains for several days now,” said Kim Young-june, a market analyst at SK Securities in Seoul.
The relentless surge in Asian shares has taken the benchmark MSCI index of Asia-Pacific shares outside Japan up nearly three quarters from its March lows, stoking some worries among analysts that an asset bubble may be forming as investors rush to take part.
The MSCI regional gauge rose about 0.6% on the day and nearly 5% for the week, tracking gains in the MSCI index of world stocks.
On Thursday, the US S&P 500 jumped 2.3% after busting through technical resistance.
A sudden rebound in property markets in China, Hong Kong and other parts of Asia has already stirred concerns about inflationary pressures.
The Shanghai Securities News reported on Friday that an unpublished Chinese government report said speculative demand from property started to emerge in May and June, but that officials were holding off from changing policy for now.
The Shanghai Composite index climbed 1.3% to a fresh 13-month closing high, posting its best weekly performance in more than two months as energy and metal shares surged after Beijing reiterated its easy monetary policy.
Valuations have risen sharply on Chinese shares. The price-to-earnings ratio on the MSCI China based on earnings forecasts one-year ahead stands at 19.97, the highest in 17 months and above the 15-year average of 12.57.
But some analysts said market watchers were overreacting by already fretting over asset bubbles.
“China has clearly begun a new asset-price inflation cycle. But having just emerged from a significant economic downturn, a speculative bubble remains quite far down the road,” said Andy Rothman, China macro strategist at CLSA, in a note to clients.
Rothman said statements by the Chinese Communist Party’s decision-making Poliburo on Thursday reaffirmed that “Beijing will not be taking tightening steps in coming quarters”.
Hong Kong’s Hang Seng trimmed gains to close up 0.8% at 19982.79, after breaching 20,000 points for the first time since the Lehman Brothers debacle in September 2008.
Japan’s Nikkei average rose 1.6% for an eighth straight day of gains. Panasonic Corp jumped nearly 8% after JPMorgan raised its rating on the stock.
Shares in Singapore jumped 2% while India gained half as much and Australia rose 0.6%. Taiwan closed a tad down.
In currencies, the euro rose against the dollar and the yen, buoyed by better-than-expected surveys in the euro zone and Germany, which sparked hopes of an improvement in economic activity in the region.
The Ifo German business sentiment index rose for a fourth month running to its highest level since October 2008, while the euro zone’s services and manufacturing sectors contracted much less sharply than expected in July.
Ifo economist Klaus Abberger lifted sentiment further when he forecast the German recession would end in the third quarter. “This is very much more encouraging. The euro zone surveys in general have been positive recently, but these are a big step forward,” Investec economist Philip Shaw said.
Some of the shine was taken off, however, by figures showing the UK economy contracted by a much sharper-than-expected 0.8% in the second quarter, which sent sterling into negative territory against the dollar.
Korea government bond futures dipped a tick to 109.79 and fell back near a one-month low hit the previous day after the solid GDP figures.
But analysts cautioned that the recovery was not strong enough yet to be self-sustaining.
“South Korea is unlikely to change its policy stance. The recovery is not on solid ground yet,” said Daniel Soh, currency strategist at 4Cast in Singapore. “We may see some monetary fine-tuning, rather than tightening, in the second half.”