Asian Stocks Outperform

By Guneet Singh Sahni - Asian Markets,

Volatility ruled the Asian markets last week... They rallied the most in two months, on the back of easing oil concerns and falling commodity prices, but ended up giving back most of their gains on the last day. Asia took its cue therein from disappointing existing home sales and job figures released in the US.

However, some of the key Asian indices still managed to post an impressive overall weekly gain of more than 4%. There was a short-term recovery in market sentiment in the beginning of the week that drove a surge in the stocks of financials across Asia. However, sales data on existing U.S. homes showed a drop to a 10-year low and dampened sentiment on Friday. This halted a four-day strong rally and revived worries about the US housing slump. The decline was further aided by the National Australia Bank (OTC: NABZY, Nasdaq: NAUBF.PK) announcement that its credit losses may surge, and by news that Samsung Electronic (Nasdaq: SSNLF, SEO: 005930) had missed its profit estimates.

The Nikkei 225 increased 4.1% or 531 points; the Hang Seng climbed 4 % or 867 points; the Strait Times went up 2.6% or 75 points; the CSI 300 index scaled up by 4.4% or 124 points; and the BSE Sensex made a gain of 4.7% or 639 points.

Japan's core consumer price index rose 1.5% Y/Y in May, its fastest pace in a decade on the back of a surge in food and energy prices. Japanese consumer prices, stripped of energy and fresh food, surged 0.1% Y/Y, the first increase since 1998 and a sign that Japan could be close to shaking off 10 years of deflation. In our article, "Asian Growth Engines Face Challenges and Stiff Inflation," we discussed how inflation is taking a toll on the Asian economies. Some of the other key developments for the week include Malaysia's central bank decision to keep its interest rates unchanged at 3.5%, putting economic growth ahead of fighting inflation. Inflation had earlier accelerated to 7.7%, the fastest pace in 26 years, owing to rising food and energy costs.

Outlook

The global cues continue to remain mixed. Light sweet crude for September delivery, the dropped more than $20 a barrel to $123.26 on worries among oil investors that high prices and a sluggish economy are reducing demand. Inflation is soaring across the whole of Asia, putting central banks into dilemma. We expect a mixed week, even as the U.S. data for strong new home sales continue to provide some positive cues.

Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: DOG, Nasdaq: QQQQ, AMEX: QLD, Nasdaq: ASIA, Nasdaq: PRASX, AMEX: PUA, AMEX: NWD, Nasdaq: MEAFX, Nasdaq: EBASX, Nasdaq: EVASX, Nasdaq: MACSX, Nasdaq: MATFX, AMEX: CZJ. Please see our disclosure at the Wall Street Greek website.