MarketWatch | Asian Markets at Close Report (December 18, 2012): Asia stocks advance on U.S. debt-pact hopes

By Sarah Turner and V. Phani Kumar, MarketWatch 

HONG KONG (MarketWatch) — Most Asian stocks climbed Tuesday on signs of progress in U.S. budget talks to avert the fiscal cliff, with exporters and financial firms driving Japanese shares to their highest level in more than eight months. 

“Investors underweight equities are becoming more anxious about being left behind if there is a reasonable outcome to the U.S. fiscal cliff negotiations,” said Ric Spooner, chief market analyst at CMC Markets. 

The Nikkei Stock Average JP:100000018 +0.96%  rose 1% to 9,923.01, a closing level not seen since early April. The advance builds on gains from the previous session, when a landslide election victory for the Liberal Democratic Party (LDP) sparked fresh optimism for the introduction of deflation-fighting policies. 

South Korea’s Kospi KR:SEU +0.51%  and Australia’s S&P/ASX 200 AU:XJO +0.48%  added 0.5% each, Taiwan’s Taiex XX:Y9999 +0.16% rose 0.2% and China’s Shanghai Composite Index CN:000001 +0.10% inched up 0.1%. 

Hong Kong’s Hang Seng Index HK:HSI -0.08% slipped 0.1%, paring some of this month’s gains.

While overnight gains on Wall Street set the tone for early gains for most regional markets, a further advance for U.S. equity futures and higher commodity prices aided sentiment. 

Also supporting stock gains, President Barack Obama reportedly made a new offer late Monday on a deal to avoid the cliff, moving closer to the Republicans’ position. The White House’s latest counterproposal included $1.2 trillion in revenue increases and $1.22 trillion in spending reductions, Reuters reported, citing an unnamed source familiar with the negotiations. Read: Obama reportedly makes new 'fiscal cliff' offer. 

 

Financial firms led the gains in U.S. markets on Monday as fiscal cliff hopes gave investors some confidence about the health of the U.S. economy and optimism on the sector spread to Tokyo on Tuesday. 

Nomura Holdings Inc. JP:8604 +6.37%   NMR +3.20%  climbed 6.4% after a 3.2% rally for its American Depositary Shares overnight, and top Japanese bank Mitsubishi UFJ Financial Group Inc. JP:8306 +3.80% MTU +1.95%  rising 3.8%.

In light of current global asset-price reflation and falling volatility, “Japan is our favored contrarian long,” said Merrill Lynch’s global equity strategy team, which recommended buying Japanese banks.

With the dollar trading around ¥84 Tuesday, many blue-chip exporters added to their Monday’s gains. See: Dollar jumps to 19-month high vs. yen. 

News of Abe leadership sends yen tumbling A day after Japan's general election, Shinzo Abe's plan to launch a stimulus to get Japan's economy on track sends the yen lower. 

Olympus Corp. JP:7733 +6.15% OCPNF +0.61%  rose 6.2% and industrial major Kawasaki Heavy Industries Ltd. JP:7012 +1.93%   KWHIF -1.07% gained 1.5%. 

Sharp Corp. JP:6753 +8.64% SHCAF +8.27%  extended its rally Monday to add another 8.4%.

Tokyo Electric Power Co. JP:9501 +17.33% TKECF +39.56% zoomed 17.3% higher, also building on strong gains in the previous session, when the stock ended limit-up amid hopes for a more favorable policy towards the sector under the incoming LDP-led government’s regime. 

In Hong Kong, insurance major AIA Group Ltd. AAIGF -4.13% HK:1299 -3.32%  lost 3.3% after former parent American Insurance Group Inc. AIG +2.98%  wrapped up its stake sale in AIA. Read: AIG sells AIA shares near top end of range. 

 

Banks also gained broadly, with China Merchants Bank Co. CN:600036 +1.20%   CIHKY -0.65% climbing 1% and China Construction Bank Corp. CN:601939 +0.44% CICHY +0.19%  trading 0.3%.

Elsewhere in the region, Korea Exchange Bank KR:004940 +2.04% KR:004940 +2.04% rose 2% in Seoul, National Australia Bank Ltd. AU:NAB +0.78% NABZY -0.27% added 0.5% in Sydney and Chinatrust Financial Holding Co. advanced 0.6% in Taipei. 

Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.