Asian shares recover on improved China PMI

Asian shares edged higher on Thursday after manufacturing data from China confirmed a recovery in the world's second biggest economy was on track, easing nervousness caused by a sharp drop in Apple Inc shares after its earnings report.

China's HSBC flash purchasing managers' index (PMI) rose to 51.9 in January to a two-year high, signalling a rebound in manufacturing activity.

"China has shown signs of recovery recently and the global economic outlook has been improving to give a generally positive direction for markets," said Koichiro Kamei, managing director at financial research firm Market Strategy Institute.

The MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.1 per cent after falling around 0.3 per cent earlier, led by its technology sector which fell about 1 per cent in earlier trade. It was recently down 0.5 per cent.

Apple, the world's largest technology company, missed Wall Street's revenue forecast for the third straight quarter after iPhone sales came in below expectations, fanning fears that its dominance of the mobile industry was slipping, sending its shares down more than 10 per cent in after-hours trading.

Apple's component suppliers such South Korea's LG Display fell, while Taiwanstocks were also dragged by Hon Hai and other Apple suppliers.

Shanghai shares extended gains to a 1.5 per cent rally from a 0.2 per cent rise after the China PMI report. Australian shares built on earlier gains to rise 0.5 per cent as the data from China, Australia's largest export market, buoyed sentiment.

South Korean shares nearly wiped earlier losses to trade down 0.1 per cent, and the benchmark Nikkei average also recouped earlier losses to rise 0.4 per cent after falling to a three-week closing low on Tuesday.

YEN BUYING HALTED

There was a pause in the two-day yen buying spree, which was driven by the Bank of Japan's latest policy easing steps on Tuesday failing to provide immediate stimulus as expected by some investors. The BOJ pledged to achieve a 2 per cent inflation target and promised to start open-ended asset buying from 2014.

The dollar rose 0.4 per cent to 88.91 yen while the euro also edged up 0.3 per cent to 118.43 yen. The yen is still down 12 per cent from its mid-November levels, when markets began pricing in strong monetary accommodation from the BOJ.

Many market players believe the yen's weakness will persist due to widespread expectations the BOJ will continue pursuing aggressive monetary easing policies to beat the country's stubborn deflation.

"The BOJ decision probably isn't a big deal in a sense that the new BOJ regime after (Governor Masaaki) Shirakawa is expected to do everything and anything available, so after profit taking, it's a good opportunity to re-enter the 'Abe trade' because it's all about expectations," said Shogo Fujita, chief Japanese bond strategist at Bank of America in Tokyo.

The "Abe trade" refers to investors betting on a weakening yen and rising Japanese equities on perception Prime Minister Shinzo Abe will pursue aggressive fiscal and monetary policies to pull Japan out of deflation and economic stagnation.

Data on Thursday confirming a deteriorating Japanese trade balance also encouraged yen selling, traders said. Japan logged a record annual trade deficit in 2012.

Earlier on Thursday, South Korea said its economy grew 0.4 per cent in the fourth quarter of 2012 on a quarterly basis. But it fell short of around 0.8 per cent growth that the Bank of Korea had projected as recently as in October, underscoring a delayed global recovery due to persistent uncertainties hobbling the major economies.

The International Monetary Fund said on Wednesday an unexpectedly stubborn euro zone recession and weakness in Japan will weigh on global economic growth this year before a rebound in 2014.

Asian economies will see weaker growth this year than was expected just three months ago, despite expected policy easing by central banks as inflation pressures taper off, a Reuters poll showed on Wednesday.

U.S. crude was up 0.2 per cent at $95.45 a barrel while Brent fell 0.3 per cent to $112.46.

London copper was down 0.1 per cent at $8.095 a tonne and spot gold inched down 0.1 per cent to $1,683.31 an ounce, slipping from a recent one-month high.

Copyright @ Thomson Reuters 2013