SINGAPORE (Thomson Financial) - Asian markets rose Tuesday, tracking the overnight gains on Wall Street, but with investors remaining cautious over the US subprime mortgage crisis which has already dragged earnings of major US financial institutions.
Investors are also looking at the possibility of a further interest rate cut in the US when the Federal Reserve meets at the end of the month, which should help restore confidence in the stock markets.
'The rebound today is a reflection of the rebound in the US overnight and we believe that is sustainable,' said Malcolm Wood, a Hong Kong-based strategist for Morgan Stanley.
'I think investors should be interested in Asia because of its premium growth, strong fundamentals, relatively high returns. Those are three good reasons,' he said.
Wood said expectations of a further rate cut in the US should support further buying activities.
'The expectations seem to have increased,' he said.
Fed Governor Randall Kroszner at a speech in Washington reaffirmed that the central bank will 'act as needed' to calm the financial markets. Last month, the Fed surprised the market when it cut its key rates by 50 basis points.
Kroszner said problems with structured credit products, which dampened profits at several banks in the third quarter, are beginning to be resolved but only gradually.
'Investors have already priced in the subprime market trouble. And even if US companies' earnings turn out to be not as strong as expected, speculations of interest rate cuts are expected to increase as the Federal Reserve meeting gets closer, which would support US shares,' said Ryuta Otsuka, strategist at Toyo Securities in Tokyo.
The Nikkei 225 index was last up 0.3 percent at 16,494.91.
But while the market is hoping for further rate cuts in the US, there is also the risk that some central banks in the region may raise rates to contain inflationary pressure.
In Australia, there is some concern over the interest rate climate as the release of third-quarter consumer price data on Wednesday could prompt a rate hike in the near term.
'That could be the spooky bit. It could be bad for media and retail stocks if there is an interest rate rise,' said Bell Potter Securities private client advisor Stuart Smith.
The All Ordinaries index was up 1 percent at 6,657, while the S&P/ASX 200 was up 1 percent at 6,642.
Positive earnings
Positive corporate earnings are another reason why there is renewed buying interest in certain markets, particularly Hong Kong.
'Positive earnings results are providing investors an excuse to pile on stocks,' said Kitty Chan, director at Celestial Asia Securities. 'The market's steep fall last night also provided opportunities for investors to hunt for bargains,' she said.
The Hang Seng was up 2 percent at 28,924.51.
China Merchants Bank Co Ltd said Monday net profit in the nine months to September surged 128.09 pct from the year before to 9.97 billion yuan, mainly boosted by higher net interest income and robust loan growth.
China Shipping Development Co Ltd, the largest coal and oil shipping company in the mainland, said net profit in the nine months to September rose 71.5 pct from a year earlier to 3.43 billion yuan on higher freight rates and volumes. For the whole year, it expects net profit to rise more than 50 percent.
While quarterly earnings of major Singapore companies due from this week onwards are expected to be positive, the market's gains were capped after shipyard operator SembCorp Marine shocked the market when it disclosed late Monday that it may incur 165 million US dollars in losses as a result of unauthorized foreign exchange transactions entered into by group finance director Wee Sing Guan.
The losses could be more, as the estimated losses do not include the 83 million dollars paid by SembCorp Marine unit Jurong Shipyard before the unauthorized transactions were uncovered.
The Straits Times index was up 0.6 percent at 3,664.87. SembCorp Marine fell 14 percent to 4.82 Singapore dollars, while its parent SembCorp Industries was down 6.4 percent at 5.90 dollars.
South Korea's KOSPI was up 1.1 percent at 1,925.90, rebounding slightly from Monday's sharp losses.
The Jakarta composite index was up 2.4 percent at 2,510.8, while Malaysia's KLCI was up 0.3 percent at 1,354.78.
jonathan.burgos@thomson.com
jb/zr COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
Investors are also looking at the possibility of a further interest rate cut in the US when the Federal Reserve meets at the end of the month, which should help restore confidence in the stock markets.
'The rebound today is a reflection of the rebound in the US overnight and we believe that is sustainable,' said Malcolm Wood, a Hong Kong-based strategist for Morgan Stanley.
'I think investors should be interested in Asia because of its premium growth, strong fundamentals, relatively high returns. Those are three good reasons,' he said.
Wood said expectations of a further rate cut in the US should support further buying activities.
'The expectations seem to have increased,' he said.
Fed Governor Randall Kroszner at a speech in Washington reaffirmed that the central bank will 'act as needed' to calm the financial markets. Last month, the Fed surprised the market when it cut its key rates by 50 basis points.
Kroszner said problems with structured credit products, which dampened profits at several banks in the third quarter, are beginning to be resolved but only gradually.
'Investors have already priced in the subprime market trouble. And even if US companies' earnings turn out to be not as strong as expected, speculations of interest rate cuts are expected to increase as the Federal Reserve meeting gets closer, which would support US shares,' said Ryuta Otsuka, strategist at Toyo Securities in Tokyo.
The Nikkei 225 index was last up 0.3 percent at 16,494.91.
But while the market is hoping for further rate cuts in the US, there is also the risk that some central banks in the region may raise rates to contain inflationary pressure.
In Australia, there is some concern over the interest rate climate as the release of third-quarter consumer price data on Wednesday could prompt a rate hike in the near term.
'That could be the spooky bit. It could be bad for media and retail stocks if there is an interest rate rise,' said Bell Potter Securities private client advisor Stuart Smith.
The All Ordinaries index was up 1 percent at 6,657, while the S&P/ASX 200 was up 1 percent at 6,642.
Positive earnings
Positive corporate earnings are another reason why there is renewed buying interest in certain markets, particularly Hong Kong.
'Positive earnings results are providing investors an excuse to pile on stocks,' said Kitty Chan, director at Celestial Asia Securities. 'The market's steep fall last night also provided opportunities for investors to hunt for bargains,' she said.
The Hang Seng was up 2 percent at 28,924.51.
China Merchants Bank Co Ltd said Monday net profit in the nine months to September surged 128.09 pct from the year before to 9.97 billion yuan, mainly boosted by higher net interest income and robust loan growth.
China Shipping Development Co Ltd, the largest coal and oil shipping company in the mainland, said net profit in the nine months to September rose 71.5 pct from a year earlier to 3.43 billion yuan on higher freight rates and volumes. For the whole year, it expects net profit to rise more than 50 percent.
While quarterly earnings of major Singapore companies due from this week onwards are expected to be positive, the market's gains were capped after shipyard operator SembCorp Marine shocked the market when it disclosed late Monday that it may incur 165 million US dollars in losses as a result of unauthorized foreign exchange transactions entered into by group finance director Wee Sing Guan.
The losses could be more, as the estimated losses do not include the 83 million dollars paid by SembCorp Marine unit Jurong Shipyard before the unauthorized transactions were uncovered.
The Straits Times index was up 0.6 percent at 3,664.87. SembCorp Marine fell 14 percent to 4.82 Singapore dollars, while its parent SembCorp Industries was down 6.4 percent at 5.90 dollars.
South Korea's KOSPI was up 1.1 percent at 1,925.90, rebounding slightly from Monday's sharp losses.
The Jakarta composite index was up 2.4 percent at 2,510.8, while Malaysia's KLCI was up 0.3 percent at 1,354.78.
jonathan.burgos@thomson.com
jb/zr COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
