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AP CENTERPIECE: Asian markets soar on China boom, stronger corporate profits

AP CENTERPIECE: Asian markets soar on China boom, stronger corporate profits

From Tokyo to Shanghai to Bombay, Asian stock markets have surged to record highs as investors race to cash in on China's boom and stocks elsewhere are boosted by stronger corporate profits and lower barriers to capital movement.
China's main market index more than doubled in 2006, hitting a record high as the year ended. Investors snapped up shares in banks, retailers and others with a stake in China's dynamo, with economic growth on track to top 10 percent. Hong Kong markets rose on a multibillion-dollar wave of stock offerings by mainland companies.
"There is really no other economy in the whole world that has the size of the Chinese economy and is growing at the same rate," said Lan Xue, head of China research for Citigroup Inc. "Clearly we are seeing a huge appetite for Chinese equity."
The U.S. economy is the world's largest, but economists expect a growth rate in the October-to-December quarter of 1.7 percent to 2.5 percent, or slightly higher. Growth estimates for the first quarter of 2007 are in the same range.
The Tokyo Stock Exchange climbed to a seven-month high amid signs the world's No. 2 economy was shaking off its 1990s doldrums. Japanese retail sales and job growth were up, while land prices rose for the first time in more than a decade.
The Tokyo surge followed a rocky start to the year when executives at Internet startup Livedoor Co. were arrested in January on fraud charges, setting off frenzied selling of tech stocks.
"Investors turned more upbeat in the latter half of the year, with optimism over corporate earnings," Yutaka Miura, a Shinko Securities Co. analyst. He said shares are expected to stay "on a moderate uptrend" amid expectations that favorable policies will be announced ahead of elections to the upper house of parliament in July.
Other Asian markets also climbed strongly over the second half of 2006, with Singapore, Hong Kong and Bombay ending at or near record highs. Prices in Manila hit levels not seen in nine years.
Prices in Asian markets plunged in June on fears about a possible global slowdown and that fighting in Lebanon between Israel and Hezbollah guerrillas could heighten regional tensions, boosting oil prices. Bombay dropped 40 percent, while indexes in Tokyo, Hong Kong and elsewhere fell 15 to 20 percent.
But markets turned around as Japan, India, South Korea and others reported higher corporate profits and job creation.
India is expected to turn in a fourth straight year of 8 percent growth. Its markets also are attracting more investment from abroad as New Delhi eases limits on taking profits out of the country and the size of foreign ownership of Indian companies.
"We fully expect the economy to not only be above 8 (percent growth) per annum, but perhaps even exceed this growth rate," said Sujit Bhalla, managing director of Oxus Research and Investments in New Delhi.
"If that is the case, then we would expect the market to continue to do well because earnings will continue to do well."
South Korean stocks rose 20 percent from a mid-year low, boosted by confidence that a mild global slowdown would avoid the "hard landing" of a recession, said Choi Un-sun, a senior analyst at Seoul Securities.
South Korean markets also got a boost from a widespread belief that share prices have not reflected stronger corporate profits, Choi said.
"Overall corporate performance was good this year and there is a sense of relief that the performance will not get worse in case of a soft landing, as well as an expectation of making money," Choi said.
Hong Kong profited from its status as a key market for Chinese companies to launch initial public offerings aimed at foreign investors. Foreign investors are barred from trading most mainland shares, but Hong Kong has no such restrictions.
The territory saw US$39.6 billion (


Updated : 2021-01-21 07:52 GMT+08:00