Japan Higher, HK and South Korea Lower

Ivaylo
07 Dec, 2006
New York City

Japan bucked the downtrend, closing up on merger-and-acquisition news. Asian markets ended broadly mostly lower Thursday, with Hong Kong and South Korea finishing lower. Hong Kong stocks fell sharply after a share sale by an institutional holder in China Mobile led investors to question whether the market has much short-term upside. South Korean shares fell, dragged down by exporters. In Taiwan, shares fell slightly, while the Australian benchmark index edged lower.

[R]7:30AM Asian stocks finished mostly lower on Thursday, Japan bucks trend.[/R]
Asian markets closed mostly lower on Thursday. Japan''s benchmark Nikkei 225 stock index rose 0.62% to finish at 16473.36. Japan Tobacco, the third-largest tobacco company in the world, surged 4.75% on news that it may bid for British competitor Gallaher Group, which owns the Benson & Hedges and Silk Cut brands.

Elpida Memory inched up 0.18% on news that it plans to triple its DRAM chip production capacity. Other advancers included electronics and machinery stocks, with Canon gaining 3.09% and Kyocera adding 1.94%.

The Hang Seng Index in Hong Kong shed 1% to 18,842.99. The placement of China Mobile shares sparked the fear that more long-term investors will sell down their portfolios. It may mean that long-term investors think upside is quite limited. HSBC Holdings also dragged the index down, falling 0.7%, as some investors cut positions for a second day.

South Korean shares declined, pushed down by exporters as the Korean won struck a fresh nine-year high against the dollar. The Korea Composite Stock Price Index, or Kospi, fell 0.2% to 1,410.30. Samsung Electronics, the largest corporation and major exporter in South Korea, fell 1.4%. Korea Exchange Bank fell 1.1% to 13,350 won after South Korean prosecutors said they have preliminarily concluded that U.S. private-equity group Lone Star Funds colluded with government and bank officials to purchase the bank for less than its fair value.

The Weighted Price Index of the Taiwan Stock Exchange lost 0.1% to end at 7686.52. Local fund managers and retail investors were reluctant to chase stocks further, as they fear foreign investors may slow buying in local stocks as they head for Christmas holidays. In Australia, the benchmark S&P/ASX200 index eased 0.03% to 5465.2. It is no surprise as metal prices were 1% to 2% weaker overnight and there was some pullbacks in BHP Billiton, which fell 1.2% and Rio Tinto, which shed 0.9%.

[R]6:30AM European markets advanced Thursday on bid activity in tobacco stocks.[/R]
European markets gained on Thursday. In early trade, the FTSE 100 London climbed 0.4% to 6,112.5, Frankfurt Xetra Dax added 0.2% to 6,380.6, and the CAC 40 in Paris was fractionally higher at 5,351.93.

Advancers

Gallaher Group, the UK tobacco company that owns the Benson & Hedges and Silk Cut brands, buoyed the sector after receiving a bid approach from Japan Tobacco. Shares in Gallaher rose 19.3%, as speculation mounted about a counterbid, possibly from Philip Morris of the US.

Altadis, the Franco-Spanish group, climbed 6% as takeover speculation spread through the sector. Imperial Tobacco, gained 7.3%.

Banks were in positive territory, led by KBC Group in Belgium which announced a 3 billion euros share buyback plan and raised its targets for the next three years. KBC shares were up 4%.

Barclays, the UK bank, gained 3% on rumours that a US banking group was interested in making an approach. Anglo Irish Bank meanwhile, continued to rise after better-than-expected full-year profits posted onWednesday, up another 2.4%.

Alcatel-Lucent, the telecoms equipment manufacturer, gained 2.6% after Goldman Sachs added the stock to its pan-Europe conviction buy list.

Decliners

Other companies updating investors were in negative territory with Bradford & Bingley shares down 2% after recent strong gains. Northern Rock shares dipped 0.3% in London. Rank Group shares slipped 1.7% after it concluded its auction of the Hard Rock Café chain of restaurants, selling them to the Seminole Tribe of Florida for $965 million.

Oil and gold

Oil prices gained slightly on Thursday after U.S. government data showed that domestic inventories of crude oil, gasoline and heating oil fell last week. Light, sweet crude for January delivery rose 23 cents to $62.42 a barrel in electronic trading on the NYME.

Gold opened Thursday at a bid price of $631.29 a troy ounce, down from $637.70 late Wednesday.

Currencies

The euro continued to hover around 20-month highs on Thursday as the European Central Bank met to decide if it should continue its campaign of rate hikes for a sixth time in a year. In morning European trading, the euro stood at $1.3287, up from $1.3285 in New York late Wednesday.

The British pound last week reached a 14-year high against the dollar. However, it has since fell, and traded at $1.9683, up from $1.9658, its peak on Tuesday. The dollar fell to 114.88 Japanese yen from 115.26 yen.

[R]5:00AM Gold and silver extend declines Wednesday due to profit-taking.[/R]
February gold lost $12 to $635.90 a troy ounce on the NYME. March silver fell 23 cents to $13.795. January platinum shed $8 to to end at $1,125.70 an ounce. March palladium lost $6.30 to $330.10. Most-active March copper settled down 8.7 cents at $3.16 per pound.

January crude oil dipped 24 cents to close at $62.19 a barrel after trading in a range of $61.84-$63.01 a barrel during the session. January unleaded gasoline settled down 1.52 cents to $1.6212 a gallon. January heating oil lost 0.43 cent to finish at $1.7940 a gallon. December natural gas advanced 4.2 cents to end at $7.727 a million British thermal units.

On the New York Board of Trade, December Arabica coffee futures declined 1.70 cents to end at $1.2170 a pound. March futures on raw sugar in foreign ports settled 0.27 cent lower at 11.49 cents a pound.