ASIA MARKETS: Asian Stocks Rally, Nikkei Hits 33-month High

By Sarah Turner, MarketWatch

HONG KONG (MarketWatch) -- An improved economic outlook boosted Asian markets Wednesday, lifting stocks in Hong Kong and Australia to near two-year highs, while Japanese shares ended at their highest level in 33 months, also fueled by earnings optimism.

Japan's Nikkei Stock Average surged 2.3% to end at its best level since April 27, 2010.

Hong Kong's Hang Seng Index rose 0.7% and Australia's S&P/ASX 200 climbed 0.2% to reach their highest closing values since April 2011. The session marked a tenth day of gains for the Australian benchmark.

China's Shanghai Composite Index added 1%, while South Korea's Kospi and Taiwan's Taiex each advanced 0.4%.

"Generally, market sentiment is that the economic backdrop is better than this time last year," said Andrew Sullivan, director of sales trading at Kim Eng Securities. Despite a few economic concerns, trading volumes have been risen in regional stocks recently, and "it seems like extra money is going to equities" rather than bonds, he added.

The region-wide advance came ahead of the conclusion of the Federal Reserve's two-day policy meeting later in the day, with investors on alert for any signals about the duration of the Fed's bond-buying program.

U.S. stock gains Tuesday had set up a mostly positive lead for Asia, with pharmaceutical giant Pfizer Inc. (PFE) leading blue-chip gains after reporting fourth-quarter earnings that beat estimates.

Dow Jones Industrial Average (DJI) and S&P 500 (SPX) futures were mildly positive by late afternoon in Hong Kong.

Stock movers

Earnings optimism gave the Japanese market an additional boost Wednesday.

Yahoo Japan Corp. (4689.TO) surged 17.1% after the company's upbeat quarterly results and announcement of a share buy back.

Telecom firms also saw earnings-related buying. Softbank Corp. (9984.TO) jumped 3.6% after the Nikkei reported that the wireless carrier is expected to post a 10% gain for its April-December operating profit, helped by sales of Apple Inc.'s (AAPL) iPhone.

Shares of rival KDDI Corp. (KDDIF) -- which also sells the iPhone, and announced a 40% increase in its quarterly operating profit Monday -- advanced 3.1%, on top of Tuesday's 2.8% rise.

Also among the wireless carriers, NTT DoCoMo Inc. (DCM) climbed 1%, underperforming the broader market after a separate Nikkei report tipped a 9% decline in the firm's nine-month operating profit.

Central Japan Railway Co. jumped 6.6% after reporting a 49% rise in nine-month net profit, while fellow rail-operator Keisei Electric Railway Co. rose 1.9%.

Some retailers also advanced after data showing a better-than-expected increase in Japanese retail sales for December. Fast Retailing Co. (FRCOY) rallied 4.3%, while Takashimaya Co. (TKSHF) gained 2.4%.

In Hong Kong, companies exposed to the global economy pulled higher, with ports operator China Merchants Holdings International Co. (0144.HK) gaining 2.2%, while industry peer Cosco Pacific Ltd. (CSPKY) rose 1.7%.

In Seoul, Samsung Electronics Inc. (SSNLF) climbed 2.2%, while rival chip maker SK Hynix Inc. (HXSCL) rose 0.6% after swinging to a quarterly profit, thanks to rising chip demand after the release of new smartphones and other devices.

Major mineral extractors paced the advance in Sydney, with Rio Tinto Ltd. (RIO) gaining 1.5%, and BHP Billiton Ltd. (RIO) climbing 1.2%.

Those gains offset losses for consumer-staples firms, including Coles supermarket owner Wesfarmers Ltd. (WFAFY), which fell 1.8% after reporting second-quarter sales figures.

Australian Prime Minister Julia Gillard surprised the country Wednesday by announcing that the next general election will be held on Sept. 14.

"This is a very early announcement for an election date. At face value, this might inject some uncertainty into the economy, yet it should be remembered that Parliament has been hung for over two years now, and political uncertainty has been high for the duration," said Michael Turner, strategist at RBC Capital Markets.

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