By Laura He and Michael Kitchen, MarketWatch
HONG KONG (MarketWatch) -- Asian stocks rallied on Thursday,
bolstered by better-than-expected Chinese manufacturing PMI data
and overnight gains on Wall Street.
A report by HSBC on Thursday showed that China's manufacturing
activity recovered at a faster-than-expected pace in May, sending
stocks higher across the region. An overnight advance in the U.S.
stocks also set the stage for gains.
Japan's Nikkei Average ended up 2.1%, and the Topix index
(USDJPY) settled 1.7% higher, while the yen dropped to Yen101.557
per dollar, compared with Yen101.433 in the previous session.
Australia's benchmark S&P/ASX 200 added 1%, and the
Australian dollar (AUDUSD) strengthened to 92.60 U.S. cents from
92.39 U.S. cents on Wednesday.
Hong Kong's Hang Seng Index finished 0.5% higher, but the
Shanghai Composite Index erased earlier gains at the close and
slipped 0.2%.
Among the market movers, Japanese broker Dawai Securities Group
jumped 4%, investment bank Nomura Holdings climbed 3.9%, electronic
components maker Alps Electric gained 3.1%, telecoms giant SoftBank
Corp. rose 2.6% and tech major Sharp Corp. tacked on 2.3%.
In Hong Kong, PetroChina Co. moved up 1.8%, after its parent
company China National Petroleum Corp. signed a
multi-billion-dollar deal with Russia's natural-gas giant
Gazprom(OGZPY) . According to the deal, Gazprom would supply CNPC,
China's largest oil and gas producer, with natural gas for 30
years, starting in 2018.
Meanwhile, Chinese computer maker Lenovo Group extended gains
from the previous session and closed 0.3% higher, after its net
profit jumped 29% for the fiscal year ended in March.
However, Chinese railroad major China CNR Corp. dropped in its
first day of trading in Hong Kong, down 1.6% from its IPO
price.
In Australia, top gainers included alumina refiner Alumina , up
7.1%, iron-ore producer Fortescue Metals Group , up 3.6%, and
mining giant Rio Tinto , up 2.6%.
China manufacturing back in business?
HSBC said the preliminary or "flash" version of its monthly PMI
headline number rose to a five-month high of 49.7 from a final
reading of 48.1 in April.
Perhaps even more encouraging, the output subindex was at a
four-month high of 50.3, from 47.9 in April, breaking above the 50
line that separates growth from contraction.
Some of the other details were similarly bullish, with
subindexes for both new export orders and overall new orders
swinging to gains, though the employment component of the report
showed a faster decline than in the previous month.
The flash PMI represents some 85%-90% of the total responses to
be used in the final report on Chinese factory activity.
While some economists have shrugged off a series of weak China
data in recent months, some shrugged off Thursday's strong PMI
reading.
HSBC's chief China economist Hongbin Qu said that "the
improvement was broad-based, with both new orders and new export
orders back in expansionary territory," but he was also troubled by
the softer employment subindex, "which implies that this month's
uptick in sentiment has not yet filtered through to the labor
market."
Taking it all into account, Qu renewed his call for looser
policy from China's central bank: "Downside risks to growth remain,
particularly as the property market continues to cool. We think
more policy easing is needed to put a floor under growth in the
coming months."
After tipping a drop in the HSBC flash PMI, meanwhile, TD
Securities cheered the surprise results but was also unconvinced
that the economy was out of the woods just yet.
"Today's data appears to show improvement to be broad-based ...
However, it is still too early to say whether this index is showing
the first signs of breaking its relationship to the iron-ore
price," wrote TD Securities strategist Prashant Newnaha, referring
to the bank's observation that the PMI and iron ore have moved in a
tightly correlated pattern over the past couple years.
PNC senior international economist Bill Adams was also cautious
about the signs of a turnaround, saying the data had picked up "to
'meh' in May from 'blech' in April."
"The Asian manufacturing business cycle could be stabilizing a
bit in May after a tough April, but the improvement is modest,"
Adams wrote, referring to both the China PMI and similar data out
of Japan.
(Some material in this report is from MarketWatch's Asia Stocks
blog.)
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