ASIA MARKETS: Asia Stocks Shine After Dow Hits Record

By Sarah Turner, MarketWatch

SYDNEY (MarketWatch) -- Asian stocks made strong gains Wednesday, as investors picked up on the advance on Wall Street -- where the Dow industrials hit an all-time high -- to push stocks higher from Tokyo to Hong Kong.

Adding to a near-2% gain made so far this week on optimism for another round of policy loosening to lift the Japanese economy out of deflation, the Nikkei Stock Average climbed 1.2% in Tokyo to trade at its highest level in nearly five years.

In Hong Kong, the Hang Seng Index rose 0.9%, while the Shanghai Composite Index climbed 0.3% on the Chinese mainland.

Similarly, Australia's S&P/ASX 200 index rose 1%, while South Korea's Kospi advanced 0.5%, and Singapore's Straits Times Index added 0.6%.

The gains across Asia came after Wall Street rallied Tuesday as a bullish survey on the service sector fed into indications that the U.S. economy is gradually improving. Read: U.S. stock rally lifts Dow to record finish

For global equities, "the medium-term picture still looks favorable," said Crédit Suisse emerging-markets strategist Adrian Zuercher. "Central banks are being very accommodative and are acting as a put option for the capital markets."

"The dearth of investment alternatives in an environment of record-low market interest rates by now across almost every fixed-income asset segment remains the most compelling argument in favor of stocks. The prevailing 'yield drought' is veritably forcing investors into stocks," Zuercher said.

While the Dow industrials (DJI) ended at a record, most Asia benchmarks have a long way to go to match that performance. The Nikkei Average, for example, remains around 70% off its record closing high of 38,915.87, hit in December 1989, just ahead of the bubble bursting that resulted in Japan's "Lost Decade."

Other Asian benchmarks also well shy of their all-time records included the Kospi -- around 10% off its 2,228.96 record close reached May 2, 2011 -- and the Australian market -- around 25% off its 6,828.71 record on Nov. 1, 2007.

Chinese markets are lagging as well. Hong Kong reached its all-time high of 31,638.22 on Oct. 30, 2007, while Shanghai's record of 6,092.06 was hit on Oct. 16 of the same year.

Wednesday saw Hong Kong-listed banks gain, with Agricultural Bank of China Ltd (ACGBF) up 2.6%, China Citic Bank Corp. (CHCJY) higher by 1.5%, and Haitong International Securities Group Co. up 1%.

Shares of Standard Chartered PLC rose 1.2% following on from gains in London after the emerging-markets-focused bank posted a 10th straight year of record profit. Read: Standard Chartered: Good '13 start after flat '12

On the Chinese mainland, property stocks recovered some ground lost this week, with China Vanke Co. up 3.2% in Shenzhen.

Shanghai-listed bank stocks were lower, however, with Bank of China Ltd. (BAC) down 0.7% and China Citic Bank Corp. losing 1.5%.

Steepening local yield curves should become the "new norm," given a stronger global economy and a reluctance among central banks to raise rates, with the move likely to broadly benefit Asian financials, said Asia bank analysts at Deutsche Bank.

Still, "while history suggests that share prices of Japanese banks and Chinese financials tend to perform best when global and domestic yield curves steepen, we maintain a neutral stance on China on sustainability concerns over its credit growth," the analysts said.

Financials and real-estate firms extended a recent advance in Tokyo, made on the back of policy-easing hopes, with the Bank of Japan set to issue its first policy decision under a new governor later this week.

Nomura Holdings Inc. (NMR) climbed 1.5%, insurer Tokio Marine Holdings Inc. (TKOMF) rose 2%, and Sumitomo Realty & Development Co. (8830.TO) improved by 2.4%.

Sharp Corp. (SHCAF) soared 12.4% after opening bid-only following several Japanese news reports that South Korea's Samsung Electronics Co. (SSNLF) would invest some 10 billion yen ($107 million) in the struggling Japanese electronics firm. Read: Samsung Electronics may buy stake in Japan's Sharp

Gains spread through much of the rest of the Japanese technology sector, with Pioneer Corp. (6773.TO) jumping 6.4%, and Toshiba Corp. (TOSYY) climbing 2.3%.

Samsung Electronics shares rose 0.3% in South Korea amid reports of the Sharp investment, while rival chip maker SK Hynix Inc. (HXSCL) climbed 3.2%.

Relatively high-yielding Australian banks were advancing again in Australia on Wednesday, with Australia & New Zealand Banking Group Ltd. (ANEWF) improving by 1.7%, and National Australia Bank Ltd. (NAUBF) up 2.1% following a report it plans almost $1 billion in cost cuts. Read: Australia's NAB reportedly targeting cost cuts

Australian interest rates have been slashed in the last year as the central bank tried to inject some life into non-mining sectors of the Australia economy.

Data out Wednesday showed the economy grew at 0.6% in the fourth-quarter of 2012, meeting economist expectations, for annual growth of 3.1%. Read: Australia's economy grows on exports, rate cuts

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