Asia shares edge up, oil hits 1-year high

Published: 19 Oct 2009 17:03:37 PST

* Asia stocks up, energy and tech share gains underpin

* Dollar slips, oil steady after topping $79

* Australian, S.Korean swap rates drop after jump

HONG KONG, Oct 19 - Asian shares hovered near 14-month highs on Monday, shaking off an early dip after disappointing earnings from U.S. corporate bellwethers such as General Electric Co spurred some investors to take profits.

Oil prices pushed up to a one-year high of $79.05, before retreating a bit, giving a boost to energy-related shares and helping stocks around the region recover from early selling of financial shares.

South Korean technology exporters such as Samsung Electronics also climbed on a weaker won, helping lift the KOSPI 0.5 percent.

The dollar slipped broadly, approaching a 14-month low against the euro as the U.S. currency remained under selling pressure on expectations U.S. interest rates will stay low for months to come.

The euro dangled just below the psychologically important $1.50 level before a euro zone finance ministers' meeting later in the day, which market participants will watch for any comments on strength in the single currency.

Company earnings remain in focus as some 135 of the U.S. S&P 500 report quarterly results this week, with the battered financial sector expected to post the highest growth rate, according to Thomson Reuters data.

"What we're seeing is just profit-taking, with Wall Street's Friday fall providing the excuse, along with a sense that the market may have risen too far, too fast," said Noritsugu Hirakawa, a strategist at Okasan Securities in Tokyo.

After rallying strongly for more than seven months, stocks have lost some momentum in recent weeks on fears that corporate earnings expectations are far too optimistic given the still frail U.S. economy.

The S&P 500 fell 0.8 percent on Friday after results from GE and Bank of America Corp highlighted that the road to recovery will be bumpy.

The benchmark MSCI index of Asia-Pacific shares outside Japan rose about half a percent, not far from its 14-month peak hit last Thursday. So far this year, the regional gauge has risen some 66 percent.

Asia ex-Japan shares remain among the top performers in the world as the region has powered out of the recession the strongest, while its major companies have benefitted from a pick-up in demand for electronics.

Japan's Nikkei average edged down 0.2 percent, paring most of its losses in late trade as short-covering emerged and most other Asian share markets rose.

Struggling Japan Airlines Corp surged 11.9 percent after losing 26 percent of its value last week, staging what market players said was a rebound on a sense the stock in Asia's largest airline by revenue had fallen too far.

Shanghai and Hong Kong stocks rose on expectations that China's third-quarter growth probably beat forecasts.

China's gross domestic product likely expanded 8.9 percent from a year earlier in the third quarter, a Reuters poll showed. GDP and other key economic data are due for release on Thursday. The Shanghai Composite rose 2.1 percent to a one-month closing high, led by property shares on upbeat sales and expectations of solid third-quarter earnings.

"China's economy is growing as a result of higher domestic demand and an improvement in exports," said Steven Lam, vice-president at Karl-Thomson Securities. "This optimism is reflected in the stock market."

Hong Kong's Hang Seng Index rose 1.2 percent to its highest close since Aug. 1, 2008. Taiwan stocks rose half a percent, gaining for a fourth straight session, as positive quarterly results from IBM and the upcoming release of Microsoft's Windows 7 bolstered PC shares such as Acer.

Singapore shares rose a tad. The Indian market was closed for a public holiday.

Australian stocks slid 0.9 percent as investors took profits in the top banks following a sharp run-up that priced them for strong growth.

CREDIT SPREADS TIGHTEN

The latest run higher in stocks has been accompanied by an investor shift into Asian fixed-income and credit markets that has pushed spreads tighter, prompting issuers to roll out new bonds to take advantage of attractive funding levels.

The iTraxx credit derivatives index of top Asian companies was quoted at 95 basis points after shrinking below the 100 basis points threshold last week for the first time in 17 months, underscoring the strong demand for higher yields.

Commodities drifted sideways. U.S. crude oil prices pared early gains and steadied above $78 a barrel while gold rose slightly to around $1,054, not far from the record $1,070 level set last week.

Government bonds were mixed and swap rates fell in some countries after having surged in Australia, New Zealand and South Korea last week on expectations that their respective central banks will be lifting interest rates in coming months.

The five-year Korean swap rate was unchanged at 4.59 percent after reaching 4.60 percent on Friday, a one-year high. The five-year Australian swap rate dropped 1 basis point to 6.04 percent, off a one-year peak of 6.12 percent.

Reserve Bank of Australia Assistant Governor Philip Lowe said that it was appropriate for the central bank to go back to a more normal monetary policy setting, reinforcing expectations another rate hike is coming in November after an increase this month to 3.25 percent -- the first of the G20 to tighten policy. (Additional reporting by Elaine Lies in Tokyo)