Asian shares mostly up on China inflation data

HONG KONG—Asian stocks were mostly higher Tuesday on relief that Chinese inflation met forecasts, while Tokyo was also boosted by a central bank plan to extend a credit line to help Japan’s post-quake economy.

Beijing said consumer prices rose 5.5 percent year on-year in May, their fastest pace in almost three years, despite leaders’ efforts to calm inflation with a series of interest rate hikes and other monetary tightening.

Hours later China’s central bank announced a fresh increase in the amount of money banks must hold in reserve, effectively limiting their lending, as leaders try to soak up liquidity.

Despite the high inflation rate, markets rose as it was in line with expectations and there had been fears the figure would be higher.

Shanghai ended 1.10 percent, or 29.66 points, up at 2,730.04 and Tokyo jumped 1.05 percent, or 99.58 points, to 9,547.79.

Seoul gained 1.37 percent, or 28.09 points, to 2,076.83 and Sydney climbed 0.50 percent, or 22.9 points, to 4,585.0.

Taipei rose 1.33 percent, or 116.26 points, to 8,829.21.

Hong Kong, which closed after the monetary tightening was announced, pared afternoon gains to finish flat, shedding 12.08 points to 22,496.00.

Many regional nations keep a close watch on China as the world’s second-biggest economy is a key driver of their own growth.

The China inflation figure, which followed April’s rise of 5.3 percent, is the highest since July 2008 – when it hit 6.3 percent.

The People’s Bank of China later raised the reserve requirement ratio 50 basis points and analysts expect the lender to soon announce its fifth rate hike since October.

Royal Bank of Canada senior strategist Brian Jackson told AFP there were “no surprises” in the reserve ratio increase and it would likely be followed by an interest rate hike before the end of June.

Beijing’s inflation target for the whole year is 4 percent.

Markets have been concerned that the country is heading for a hard landing as previous data show manufacturing easing, new loans falling and auto sales also lower.

However, most analysts said that was unlikely as other figures Tuesday showed fixed asset investment for January-May rising 25.8 percent on year, up from 25.4 percent in the first four months of the year.

Bank of America-Merrill Lynch economist Lu Ting said “a hard landing is a low-probability event.”

“The data came in line with expectations after the market had been plagued by expectations of high inflation over the past few sessions,” Shenyin Wanguo Securities analyst Qian Qimin told Dow Jones Newswires.

Tokyo received a boost from the Bank of Japan’s plan to extend a three trillion yen ($37.4 billion) lending facility to encourage banks to channel funds into sectors such as renewable energy and medicine.

It will offer a new credit line of up to 500 billion yen to make it easier for smaller firms to access cash from banks without using traditional real estate collateral.

TEPCO jumped 25.12 percent after Japan’s cabinet agreed a bill to help the embattled utility compensate people affected by the crisis at the Fukushima Daiichi atomic power plant, which was crippled by a March 11 quake and tsunami.

The euro held up despite Standard & Poor’s slashing its credit rating for Greece by three notches to “CCC,” saying there was a significantly higher probability of a default in the struggling eurozone member.

The agency said: “The downgrade reflects our view that there is a significantly higher likelihood of one or more defaults, as defined by our criteria relating to full and timely payment.”

In Tokyo afternoon trade, the single currency fetched $1.4429, from $1.4413 in New York late Monday, while also rising to 115.92 yen from 115.54 yen.

The dollar was at 80.29 yen compared with 80.21 yen.

Oil was mixed. New York’s main contract, light sweet crude for July delivery, lost 10 cents to $97.20 a barrel, but London’s Brent North Sea crude for July rose 27 cents to $119.37.

Gold closed at $1,519-$1,520 an ounce in Hong Kong, down from Monday’s close of $1,530-$1,531.

In other markets:

— Singapore closed flat, edging down 1.65 points to 3,057.39.

DBS Bank rose 0.84 percent to Sg$14.46 while SingTel lost 0.65 percent to Sg$3.08.

— Manila closed 0.75 percent, or 31.27 points, lower at 4,140.27.

San Miguel fell 0.8 percent to 112.30 pesos, Alliance Global shed 2.1 percent to 9.65 pesos and Metropolitan Bank & Trust lost 0.8 percent to 67.95.

— Wellington added 0.35 percent, or 12.17 points, to close at 3,488.85 despite new aftershocks in the quake-hit New Zealand city of Christchurch.

Telecom added 4.6 percent to NZ$2.375 and Sky City rose 2.3 percent to NZ$3.62. But PGW Wrightson shed 1.9 percent to NZ$0.51.

— Kuala Lumpur added 0.17 percent, or 2.63 points, to 1,548.51.

Marine engineering firm MISC climbed 2.2 percent to 7.11 ringgit as gaming giant Genting rose 1.1 percent to 3.56 ringgit and Malaysia Airlines slid 2.2 percent to 1.38 ringgit.

— Jakarta rose 0.65 percent, or 24.52 points, to 3,773.27.

Bank Mandiri added 0.7 percent to 6,950 rupiah, while car maker Astra International gained 1.7 percent to 57,350 rupiah.

— Bangkok jumped 1.91 percent, or 19.39 points, to 1,034.92.

Coal producer Banpu advanced 14 baht to 729 baht, and energy giant PTT rose 8 baht to 339.

— Mumbai rose 0.23 percent, or 42.63 points, to 18,308.66, snapping four straight days of losses.

Leading motorcycle maker Bajaj Auto advanced 2.26 percent to 1,372.45 rupees while India’s largest private bank ICICI Bank added 1.52 percent to 1,055.2.