Weekly Roundup: Asian Stock Markets Advance On US Data, China Manufacturing

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By Satya Nagendra | November 24, 2012 4:53 PM EST

Asian stock markets reported the best weekly gains in two months this week as investor sentiment turned positive on signs of an improvement in global manufacturing while hopes that the U.S. lawmakers would soon arrive at a consensus to avoid the "fiscal cliff” also added to the sentiment.

Hong Kong's Hang Seng Index climbed 3.6 percent and closed at 21913.98. China's Shanghai Composite Index rose 0.6 percent and closed at 2027.38.

Market confidence was lifted after reports showed an improvement in manufacturing from both China and the euro zone.  Euro zone’s manufacturing purchasing managers’ index (PMI) rose to an eight-month high of 46.2 in November from 45.4 in October while a private survey Thursday showed that China’s manufacturing activity expanded for the first time in more than a year in November.

The HSBC Flash Purchasing Managers Index (PMI), a measure of the nation-wide manufacturing, gained to 50.4 in November, entering an expansionary territory of above 50 for the first time in 13 months, from October’s final reading of 49.5. The Chinese data followed a report that showed manufacturing in the U.S. grew at its fastest pace in five months in November.

“The manufacturing data bodes very well for 2013. A lot of the bad news has been priced in. We’ve probably seen the bottom for the markets,” Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management, said on Bloomberg Television.

The sentiment was also lifted by the encouraging U.S. economic data on hopes that President Barack Obama and the congressional leaders were making advances in reaching a conciliation to avert the “fiscal cliff,” a term used to describe a raft of tax increases and spending cuts that would automatically start next year if nothing was done.

The U.S. housing data during the week was encouraging, with home builders’ confidence and existing home sales beating the expectations. The National Association of Home Builders said Monday its home builders' confidence index jumped to the highest since May 2006 while the National Association of Realtors home sales report showed that the existing home sales unexpectedly rose to 4.79 million units in October from the upwardly revised 4.69 million units in the previous month. The Labor Department's weekly jobless claims data showed that the number of new people claiming jobless benefits in America dropped in the previous week.

However, Federal Reserve Chairman Ben Bernanke’s comments about the ‘fiscal cliff’ and renewed euro zone crisis weighed on the Asian markets in the first half of the week.  On Tuesday, Bernanke warned that monetary policy couldn’t do much to prevent the U.S. economy from falling into a recession if the lawmakers failed to avert the potential fiscal crisis.  

After nearly 12 hours of talks in Brussels Tuesday, European officials ended the discussion on Greece’s next tranche of bailout without a deal and said they would meet again next Monday.

Japan's Nikkei 225 Stock Average surged 3.8 percent and closed at 9,366.80 in the holiday-shortened week. South Korea's Kospi Index gained 2.7 percent and closed at 1,911.33.

Japanese stocks reported weekly gains despite the weak merchandise trade data as the exporter companies rallied on a weaker yen. Official data Wednesday showed that Japan’s merchandise trade balance had remained in deficit for four straight months. The world’s third largest economy recorded a trade deficit of 549 billion yen ($6.7 billion) in October, much worse than the economists' estimate of a 360-billion yen deficit as exports to China continued to slump following a territorial spat between Tokyo and Beijing.

Meanwhile, the Bank of Japan kept its key policy rate unchanged and refrained from announcing any monetary easing measures in spite of the political pressures on it to pursue the aggressive stimulus steps for reviving the economic growth momentum.

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