Asian stocks broadly surged ahead amid strong growth

BEIJING » 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.

ASSOCIATED PRESS Philippine shares climbed to the best level in nearly 10 years, lifted by stocks with rosy growth prospects. Filipino traders threw confetti yesterday as they celebrated the closing of markets at the Philippine Stock Exchange south of Manila.

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 $39.6 billion in IPOs in 2006, many of them from mainland companies, according to Hong Kong Exchanges & Clearing Ltd., which operates the Hong Kong Stock Exchange. One was the world's biggest IPO ever -- the $21.9 billion offering in October by state-owned Industrial & Commercial Bank of China Ltd., the mainland's largest lender.

The boom fueled a 45 percent rise in Hong Kong's main index.

The IPO rush has sent money coursing through the Hong Kong securities industry, almost quadrupling already sky-high rents in the financial district since 2003.

In China, a fall in global oil prices meant fatter margins for refiners, while Beijing's efforts to build up world-class competitors in industries ranging from telecoms to banking have produced bigger profits for elite state companies.

The trickle of money from abroad into Chinese markets grew as more foreign financial firms were granted permission to invest in the main "A-shares" usually reserved for domestic investors.

Previous Chinese market booms were driven by the government, with speculators intently watching announcements about credit or industrial policy to pick favored companies.

But now, "government policy is playing a declining role in the equity market, because the market is getting bigger," with market values of up to $50 billion for the biggest Chinese companies, said Citigroup's Lan.

"I think this rally is more supported by economic fundamentals than any rally we have seen before in China," she said. "Clearly, I do not see this market collapsing."

The Asian markets are not without their pitfalls, however.

On Dec. 18, Thailand put in place controls to restrict foreign investment that sent shivers through the investment community. A day later, the Thai market plunged nearly 15 percent and other Asian markets followed amid anxieties about a replay of the 1997 Asian financial crisis.

Thai monetary authorities relaxed some of the controls, calming the markets. But analysts said the event showed the dangers of investing in developing markets.

China, too, has its concerns. China's government is worried that the economy is overheated, so it has hiked interest rates and increased the deposit reserve requirement ratio for banks to curb excessive liquidity.