The Hong Kong stock market continued its amazing run on Wednesday, stretching its winning streak to five sessions while exploding for more nearly 2,300 points or 16 percent as it touches a fresh seven-month closing high. The Hang Seng Index is closing on the 17,000-point plateau, and now analysts say that the market could challenge that level at the opening of trade on Thursday.
The global forecast for the Asian markets is positive, although investors are likely to be nervous ahead of Thursday's results of the stress test for U.S. banks, and the U.S. non-farm payroll data on Friday. Also, several of the Asian markets are overdue for a downward correction on profit taking. Better than expected corporate and economic news sent the European and U.S. markets broadly higher, and the Asian bourses are also expected to trade more modestly to the upside.
The Hang Seng finished sharply higher again on Wednesday, as the financial shares extended their recent rally. For the day, the index soared 404.49 points or 2.5 percent to close at 16,834.57 after trading between 16,268.03 and 16,885.92 on turnover of 80.40 billion Hong Kong dollars.
Among the gainers, Hang Seng Bank jumped 10 percent, while HSBC Holdings was up 6.3 percent and Bank of East Asia surged 6.1 percent.
Wall Street offers an optimistic lead as stocks moved mostly higher over the course of the trading day on Wednesday, with traders reacting positively to some much better than expected economic data as well as reports suggesting that several of the financial companies examined by the government don't need additional capital.
Some initial strength was generated by the release of a report from payroll giant Automatic Data Processing (ADP) showing a much smaller than expected decrease in private sector employment in the month of April. The report showed that non-farm private employment fell by 491,000 jobs in April following a revised decrease of 708,000 jobs in March. Economists had expected a decrease of 645,000 jobs compared to the loss of 742,000 jobs originally reported for the previous month.
While the data points to continued weakness in the labor market, it presents another sign that the economy is stabilizing and generated some optimism about the Labor Department's monthly employment report due to be released on Friday - which is expected to show a decrease of less than 500,000 jobs.
The markets also benefited from media reports saying that the government stress tests of the nation's leading financial firms have determined that JP Morgan (JPM), Goldman Sachs (GS), American Express (AXP), and Bank of New York Mellon (BK) will not need additional capital. At the same time, reports have suggested that Bank of America (BAC), Citigroup (C), and Wells Fargo (WFC) will be asked to raise additional capital. While the official results are not due to be released until after the close of trading on Thursday, the leaks generated some optimism about the outlook for the financial sector.
In other news, shares of Disney (DIS) saw considerable strength after the entertainment giant reported second quarter earnings that fell sharply year-over-year but reported adjusted earnings that came in above analyst estimates. Disney reported adjusted second quarter earnings of $0.43 per share compared to analyst estimates of $0.40 per share. At the same time, the company said its revenue edged down 7 percent to $8.09 billion, slightly below analyst estimates of $8.15 billion.
While the NASDAQ underperformed the Dow and the S&P 500 by a wide margin, the major averages all closed firmly positive. The Dow closed up 101.63 points or 1.2 percent at 8,512.28, the NASDAQ closed up 4.98 points or 0.3 percent at 1,759.10 and the S&P 500 closed up 15.73 points or 1.7 percent at 919.53.
In economic news, the International Monetary Fund said on Wednesday that Asia is set for a sharp deceleration in growth this year and would see a tepid recovery in 2010. The IMF expects Asian growth to fall sharply to 1.3 percent in 2009 from 5.1 percent in the previous year. The region's growth is expected to rebound in 2010 at a rate of 4.3 percent. In February, the lender had predicted 2.7 percent growth for 2009. The IMF sees GDP declines in Japan, Australia, New Zealand, Hong Kong, South Korea, Singapore, Taiwan, Malaysia and Thailand this year. The worst decline is forecast for the city-state economy of Singapore, which is expected to shrink 10 percent this year.
Also, Hong Kong is on Thursday set to announce FX reserves numbers for April, with forecasts predicting a surplus of $189.76 billion - up from $186.2 billion a month earlier.
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