Asian Markets End Mixed, But Chinese Stocks Surge

Asian stocks were mixed in the afternoon session Thursday with Japan and Australia closing lower. But the Shanghai market took centerstage, surging as much as 9.5 percent at one point after a stamp duty tax cut gave flagging Chinese stocks a boost.

Investors though, were still anxious about rising inflation in Asia, daunted by the soaring price of rice, which hit a record high. Markets made a cautious and slightly negative start to the session until the Shanghai Composite Index opened 8 percent higher on the strength of a cut in stamp tax. The index closed 9.3 percent in the green.

The stock-trading tax was cut to 0.1 percent from 0.3 percent, in the hopes of bolstering Chinese markets which have been in freefall for three months. The long-rumored stamp tax cut took effect today.

Investors have been pushing for such a move, with the Shanghai Composite Index down 51 percent from its peak last October. The cut returns the stamp tax to its level last May, when the government raised it to cool the market, which had been surging in a two-year bull run that ultimately boosted the key index nearly six-fold.

Shanghai's surge, which drove some stocks such as China Life Insurance to their 10 percent daily limits, initially injected some optimism into the Japanese market.

But it wasn't enough to keep the Nikkei 225 Average

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[JP;N225  Loading...      ()] in the black. After a see-saw session, the Nikkei closed down 0.3 percent, dragged lower by steel shares after JFE Holdings posted a 2.1 percent drop in annual profit and said it was not yet able to issue forecasts for the year to March 2009. Nippon Oil and other oil-related shares slid after oil slipped, though shipping firms powered higher after the Baltic Exchange's dry freight index, an indicator of seaborne trade for dry commodities, climbed 3.7 percent on Wednesday.

South Korea's KOSPI closed a touch lower with gains by technology shares undermined by automakers' losses, after Hyundai Motor's first-quarter earnings came way below market expectations.

Australian shares finished 1.2 percent weaker, as BHP Billiton led other resource firms lower on a fall in oil and metal prices, while worries about the health of the financial sector weighed on the banks.

Hong Kong stocks rose 1.6 percent, lifted by strong gains in the Shanghai market. Chinese power producers jumped as executives and investors expect the government to raise power tariffs as early as the third quarter of this year. Shares in China Resources Power rose as much as 19 percent while top electricity provider Huaneng Power International gained 9 percent although it posted an 80 percent fall in first-quarter earnings earlier in the week as its unit fuel cost rose 26 percent year-on-year.

Singapore's Straits Times Index was higher with shares of Singapore-listed Chinese firms or
S-shares climbing. Large cap firms such as rig-builders Cosco and Yangzijiang rose sharply. Yanlord Land rose as much as 9.1 percent on bargain hunting of stocks that are trading below net asset value.

The latest commodity to race to a record was rice, the world's second biggest food grain crop, which has hit successive new peaks due to worries about supply shortages that have led to political unrest and export restrictions.

Chicago Board of Trade July rough rice futures surged to a record high of $25.010 per hundredweight in early Asian trade.  In the latest development, Brazil temporarily suspended rice exports on Wednesday to safeguard domestic supplies and keep prices of the basic foodstuff stable.