Asian markets up ahead of ECB lending move

HONG KONG—Asian markets mostly extended gains Wednesday on optimism ahead of another ECB refinancing operation while US stocks provided a strong cue after closing at a near four-year high.

The euro was mixed in the afternoon amid expectations of a strong take-up of the European Central Bank’s offer of cheap cash to under-pressure lenders, while oil prices rose on concerns over the stand-off between Iran and the West.

Sydney ended 0.84 percent, or 35.9 points, stronger at 4,298.6, Seoul added 1.33 percent, or 26.56 points, to 2,030.25 and Tokyo closed flat, edging up 0.72 points to 9,723.24.

Hong Kong rose 0.52 percent, or 111.35 points, to 21,680.08 and Shanghai was 0.95 percent, or 23.37 points, up at 2,428.49.

The ECB will on Wednesday hold its second lending operation aimed at averting a credit crunch in the euro area by providing much-needed cash to banks at a rock-bottom rate of one percent for three years.

At the first long-term refinancing operation (LTRO) – dubbed “Big Bertha” by ECB chief Mario Draghi – in December, 523 banks lined up to borrow a record 489.2 billion euros.

According to Draghi, banks are likely to borrow a similar amount this time.

Chris Gore, analyst at GO Markets in Melbourne, warned in a note that the refinancing could be a double-edged sword.

“Any significant deviation to the upside (would) likely help risk sentiment, although it should be noted an extremely high take-up of the ECB loans may also serve to highlight just how reliant banks are on ECB funding,” he said, according to Dow Jones Newswires.

A Japanese trust bank trader said the common currency may rally if the loan amount is larger than expected.

Such an influx of liquidity can encourage investors to turn toward assets deemed riskier, such as the euro, and away from currencies currently seen as safe havens, such as the dollar and yen.

The euro fetched $1.3461 and 108.47 yen in early Europe trade, compared with $1.3466 and 108.34 in New York late Tuesday.

The dollar firmed to 80.58 yen from 80.45 yen.

Asian traders were given a strong lead from Wall Street after the Dow ended at its highest level since before the global financial crisis kicked in.

With upbeat consumer sentiment data lifting spirits, the Dow continued its recent rally to end at 13,005.12, its best finish since May 19, 2008.

Adding to broad regional confidence was news that Japanese industrial production in January rose by a bigger-than-expected 2.0 percent from the previous month as companies stepped up output of cars and electronic products.

The rise beat average market expectations of around 1.5 percent growth and followed a revised month-on-month rise of 3.8 percent in December.

And in South Korea output unexpectedly increased by 3.3 percent last month from December, easing concerns of a sharp slowdown in the export-dependent nation. Analysts had predicted a 1.2 percent fall, according to a Dow Jones Newswires poll.

On Tokyo’s Nikkei index, shares in chipmaker Elpida crashed 97.24 percent after the microchip maker’s bankruptcy filing on Monday.

Elpida, one of the world’s biggest chipmakers, announced the largest corporate failure in Japanese manufacturing history on Monday.

It closed at seven yen Wednesday.

On oil markets, prices advanced as concerns over Tehran’s nuclear program crept back into the market.

Israeli Prime Minister Benjamin Netanyahu Tuesday said a nuclear-armed Iran would control the major Gulf oil producers, send energy prices soaring and “choke” the global economy.

New York’s main contract, light sweet crude for delivery in April, gained 52 cents to $107.07 and Brent North Sea crude for April delivery was up 87 cents to $122.42.

Western countries have imposed a raft of sanctions on Iran in a bid to halt its nuclear program, which they say masks a bid to build atomic weapons, a claim Tehran denies.

Iran has said it will close the Strait of Hormuz – a key transit route for global oil supplies – if increased Western sanctions halt Iranian oil exports.

Gold was at $1,788.20 an ounce at 1030 GMT, compared with $1,776.70 on Tuesday.

In other markets:

— Singapore was 0.82 percent, or 24.33 points, up at 2,994.06.

Oil rig maker Keppel Corp gained 0.55 percent to Sg$11.05, while United Overseas Bank was up 0.28 percent at Sg$18.05.

— Taipei rose 2.04 percent, or 162.10 points, to 8,121.44.

Hon Hai rose 3.54 percent to Tw$102.5 while TSMC gained 2.53 percent to Tw$81.1.

— Manila closed 1.60 percent higher, adding 77.22 points to 4,897.65.

Energy Development Corp. gained 7.28 percent to 5.45 pesos while Philippine Long Distance Telephone Co. rose 0.28 percent to 2,858 pesos.

— Wellington ended 0.38 percent, or 12.73 points, higher at 3,322.53.

Fletcher Building rose 3.2 percent to NZ$6.54, Contact Energy added 0.42 percent to NZ$4.82 and Auckland Airport shed 1.6 percent to NZ$2.41.

— Jakarta added 2.09 percent, or 81.65 points, to 3,985.21.

Car maker Astra International gained 1.5 percent to 70,850 rupiah, state-owned lender Bank Mandiri gained 3.2 percent to 6,450 rupiah and food manufacturer Indofood Sukses Makmur rose 4.6 percent to 5,100 rupiah.

— Kuala Lumpur advanced 0.83 percent, or 12.92 points, to 1,569.65.

Plantation firm Sime Darby gained 1.3 percent to 9.69 ringgit, while gaming giant Genting inched up 0.6 percent to 10.60 ringgit. Petronas Chemicals lost 1.5 percent to 6.70 ringgit.

— Bangkok rose 1.28 percent, or 14.64 points, to 1,160.90.

— Mumbai edged up 12.28 points, or 0.07 percent, to 17,743.4.

Intraday gains were lost after data showed that India’s economy grew by its slowest pace in three years.

India’s GDP grew by 6.1 percent in the final three months of 2011, hit by aggressive interest rate hikes and a stumbling global economy.

The figure was below market expectations of 6.3 percent, leading to a sell-off.