Asian markets a bit mixed as Australian bourse powers higher

The Chinese stock market extended its losses into a third trading day on fears that tightening monetary policy might hurt company earnings growth. The Shanghai share index fell 17 point to 2,980, below the important 3,000 mark. Basic material and consumer goods sectors led the fall. Chinese rare earth producer Inner Mongolia Baotou (600111.CH) reported higher than expected third quarter earnings and also raised its full year net profit forecast by 1200%. The company share price has increased by 252% this year and remains in an upward trend.

In Hong Kong, the Hang Seng index closed slightly higher, up 61 points to 23,225, shrugging off weak leads from Wall Street and the Chinese mainland stock market. Retail giant Li & Fung traded 2.48% higher on the day, and was one of the most actively traded stocks, as investors were encouraged by the announcement that Christmas orders in the US are significantly higher compared with last year. Chinese banks and insurers listed in HK also traded higher, helping to lift the index. China Coal company (1898.HK) lost 2.69% in the early trading session despite a reported 14.2% increase in third quarter net profits. The share price rallied nearly 50% and today’s move appeared to be profit taking.

The Australian share market powered ahead today (+37 to 4,685), fuelled by another strong banking result and substantial index buying. ANZ Bank (+69 c to $24.73) released a better than 50% profit increase for the year, and the big four banks led the market higher in the morning session. Although initially languishing, resource share prices turned and moved higher in concert with the Australian dollar (+0.0041 to 0.9760). In this respect, the sector and the market continued this week’s pattern of Asian markets ignoring overnight action and setting the trend for the global trading day.

Volume in index futures was well above average, in contrast to individual stock volumes, which were light. This suggests involvement from larger institutions, as both buyers and sellers, reflecting current market disagreement about the likely size and effect of QE2 on asset prices. Outside finance, sectoral trends were harder to detect. While the tone is generally positive, diverse names like Harvey Norman (-5c to $3.38), Fortescue (-11c to $6.17) and Coal and Allied (-$1.11 to $112) are all in the red. Arafura Resources (-2c to $1.40) fluctuated through a ten percent range after announcing a placement to further advance its rare earth project.