Asian Markets Rise Despite Measures to Stem Cash Flow


Asian markets rose Thursday with China's Shanghai Composite Index climbing 1% to 3,148 and Hong Kong's Hang Seng Index rising 0.3% to close at 9,861. In Japan the Nikkei 225 Index gained 0.8% to end the day at 24,700.

Investors piled money into stocks in China, despite the Central government's bold move late yesterday to boost bank reserve ratios by 0.5%. Bloomberg reports that some banks, like Bank of Communications, got hit with increases twice yesterday, shouldering a 100 basis point hike in one day. But Beijing may be misguided in thinking it can still control the liquidity in the market. This action is designed to limit the available funds swishing around and stoking speculation.

Liquidity Driving Broad Gains

China is now drawing investors from around the world, all eager to get in on the action and aided by massive stimulus packages like the recent quantitative easing by the Federal Reserve (QE2) -- not to mention massive investment banker bonuses. "There's still room for stocks to go up, because we have abundant liquidity both home and abroad," a fund manager at Shanghai River Fund Management told Bloomberg.

Today Chinese banking shares rose with Agricultural Bank of China and China Minsheng Bank both climbing 1.1% and Industrial & Commercial Bank of China gaining 0.6%.

Oil refiners made huge strides today helping to boost the index higher. Investors are betting that energy prices will rise along with everything else as China endures record inflation. PetroChina leaped 7.7% and China Petroleum & Chemical surged 5.2%.

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Chinese real estate firms also continued their climb, despite rumors that new real estate taxes could be in the works. Poly Real Estate advanced 1% and Gemdale and China Vanke were both up 0.5%. For those shopping for multi-million dollar mansions, a few more percents in taxes isn't much of a burden.

In Hong Kong the increase in China's reserve ratios was taken as a positive sign and banking shares rallied. Industrial & Commercial Bank of China saw a 2.9% gain, HSBC climbed 0.9% and China Construction Bank moved up 0.8%.

Other big gainers included Ping An Insurance, which soared 4.7% and oil companies Cnooc and Hong Kong-listed shares of PetroChina, which both ended the day up 3.4%.

Wheeling and Dealing From a Jail Cell

Hong Kong's business gossip of the day included a 18.7% surge in Gome Electrical Appliances, whose founder is still exercising strong control over the company from his jail cell. Huang Guangyu, who is said to be worth up to $6 billion, according to the BBC, and is serving a 14-year prison sentence for stock manipulation. After a recent struggle with Gome's board, Huang has succeeded in getting his sister and his lawyer appointed to the board, says Bloomberg Businessweek. From his executive suite in prison, he threatened to cut the company's ties between Gome and his empire of 400 privately owned shops, which would have dealt the company a huge blow.

In Japan financial firms led the index higher with Mizuho Financial shooting up 2.4%, Sumitomo Mitsui increasing 1.8% and Mitsubishi UFJ rising 1.5%.

A rise in the value of the dollar sent Japanese car manufacturers higher. Mazda surged 2.4%, Toyota leaped 2%, Fuji Heavy Industries advanced 0.8% and Isuzu gained 0.6%.