Asian stocks rose Tuesday, with markets in Japan and Hong Kong tilting higher as investors bought financials such as Mitsubishi UFJ Financial Group and property developers such as Cheung Kong Holdings on speculation the Federal Reserve will cut interest rates in an attempt to avert a U.S. recession next year.
Japan's Nikkei 225 ended 0.8% higher at 16,044.72. The Topix index added 0.6% to 1,567.02. Sony Corp. (SNE) led gains among export-related shares after the U.S. dollar climbed to a one-month high against the yen.
Australia's benchmark S&P/ASX 200 was up 0.8% at 6,680.4 and South Korea's key Kospi index advanced 1% to 1,925.07.
Hong Kong's Hang Seng Index climbed 725 points, or 2.6%, to end at 29,226.84 while the China Enterprises Index, or shares of mainland companies listed in Hong Kong, added 01.8% to 17,497.77.
Interest-rate-sensitive stocks were higher on speculation that the Federal Reserve's policy panel, the Federal Open Market Committee, would cut lending rates when it meets later Tuesday. Consensus analysts' forecasts are for a quarter-point cut in the federal funds rate to 4.25% and a half-point cut in the discount rate to 4.5%.
Real estate shares were in focus in Hong Kong with Cheung Kong (CHEUY) adding 4.6% while office landlord Swire Pacific added 7.7% and Sun Hung Kai Properties (SUHJY) added 6.8%. Hong Kong interest rates tend to rise and fall in parallel with U.S. lending rates because of the territory's dollar-pegged currency system.
"The property stocks have been a big mover," said Pauline Dan, a fund manager with MFC Global Investment Management in Hong Kong. "People are expecting good news from the U.S. on the interest-rate front."
Dan added markets are likely to rally in the event of a bigger-than-expected U.S. rate cut, even though such a move might signal that credit-market woes are worse than thought.
"It's likely to be positive for Asia," she said, since any rate U.S. rate reduction would trickle through to Hong Kong.
Shanghai's Composite Index reversed early losses to trade 0.3% higher at 5,175.08, Taiwan's Weighted Price Index added 0.5% to 8,638,33, and Singapore's Straits Times Index added 0.1% to 3,589.03.
Chinese government data showed the nation's key inflation gauge accelerated to an 11-year high in November, exceeding economists' forecasts as food prices surged at a faster-than-expected pace.
The consumer price index climbed 6.9% in November from a year earlier, exceeding a 6.5% increase in October, the National Bureau of Statistics said. Food prices, which account for one-third of the index, surged 18.2%, up from a 17.6% rise in October.
"The price of agricultural products may not moderate in the short term, as measures China has taken to address the food supply shock will take some time to be effective," said Jing Ulrich, chairman of China equities at JPMorgan Securities in Hong Kong in a research note Tuesday.
In currencies, the U.S. dollar was trading at 111.995 yen, up from its level of 111.71 yen in late New York trading Monday.
The weaker yen propelled exporters, with shares of Sony up 2.6% while Toyota Motor (TM) added 0.3%.
Financial shares were mostly higher after news of a private-equity investment in bond insurer MBIA Inc. (MBI) and a capital injection from external investors in UBS (UBS) lifted the financial sector in overnight trading and eased credit concerns.
Shares of Mitsubishi UFJ and Sumitomo Mitsui Financial Group both climbed 0.6% while Commonwealth Bank of Australia added 0.5%. Hong Kong-listed HSBC Holdings (HBC) climbed 2.2%.
January crude-oil futures climbed as much as 49 cents to $88.35 a barrel in after-hours trading. The contract ended 42 cents lower Monday at $87.86 a barrel in trading on the New York Mercantile Exchange.
Natural resource shares were generally higher, with Australia's BHP Billiton (BHP) adding 1.4% and Japan's Mitsubishi Corp. climbed 6.1%
Rio Tinto (RTP) was down 0.1%.
In Shanghai, shares of Baosteel Group Corp. were suspended from trading. No formal reason for the suspension was given, sparking speculation the group may be weighing a bid for Rio Tinto. Baosteel said its shares will resume trading Wednesday.
In other Tokyo trading, shares of ball point pen maker Pilot Corp. climbed 7.5% after the firm reportedly planned to split its existing shares on a five-for-one basis on Jan. 1.
Meiji Dairies Corp. led shares of milk producers higher on reports the industry is considering lifting milk prices next year for the first time in three decades to compensate for higher production cost. Shares of Mieji Dairies climbed 1.5%.
