×

Asian Markets Mixed, Japan Digests DPJ’s Defeat

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hello to our viewers all over China.

You're watching “Asia Market Daily”, co-produced by CCTV Business Channel and CNBC, first in business worldwide.

I am Saijal Patel and here are the top stories across Asia today.

It was a mixed bag of results at the start of Asia's trading week.

In Japan, the benchmark Nikkei 225 traded up all day, only to give up its gains to close lower at almost 4-tenths of a percent.

Japanese stocks had mostly discounted news on the election setback by the ruling Democratic party.

Jesper Koll of JP Morgan Securities on the implications for the financial markets.

(SOT) Jesper Koll, MD & Head of Japanese Equity Research, JP Morgan Securities Japan:

“The result of the elections means no new additional policy initiatives for the domestic side, as a result focus on what Japan knows how to do which is export, with the possible windfall you are getting from the weaker currency."

We have more details on the Japan elections in a while.

Elsewhere in Asia, investors seemed upbeat as they wait for a string of U.S. corporate earnings out this week - to set the tone in markets.

South Korea's KOSPI finished 0.64 percent higher after the Korean won hit its strongest level in more than 2 weeks.

In Australia, the S&P ASX 200 also ended up, by 0.3 percent.

Bucking the trend, Orica shares tumbled in its first trading day as a de-merged company.

Orica, the world's largest industrial explosives maker says it may consider acquisitions after its split with its DuluxGroup.

DuluxGroup will begin trading as a separate company tomorrow.

In Japan, the prospect of political gridlock in Japan as exit polls show the ruling coalition government suffered a heavy defeat in upper-house parliamentary elections.

All eyes now on who the Democratic Party might take on as a coalition partner.

Kaori Enjoji CNBC's Tokyo Bureau Chief with the details.

With just 44 seats for the Democratic Party and zero for the coalition partner, it means that the coalition has lost its majority in the upper house. Although it will be able to remain in power, it is likely to court some of the smaller parties to pass through key legislation. Despite the setback for Naoto Kan and the Democratic party, many economists here were positive about the implications for Japan's economy.

(SOT) Jesper Koll, MD & Head of Japanese Equity Research, JP Morgan Securities Japan:

“I think that you're going to see a more focused pro-growth policy led by the Japanese bureaucracy, and all political parties, whether it's the democrats, whether it's the LDP, whether it's the Minamoto, and you know, everybody's going to be pro-growth so that means that actually the probability of corporate tax cut has actually increased after the election also the probability of a VAT consumption tax hike has receded very significantly so this election result, despite the fact that we don't have a clear winner is actually positive because the clear winner is going to be economic policy.”

Another reason many analysts were upbeat was the performance by the small startup Your Party. Its stable of entrepreneurs helped it to become a major force in Japanese politics as a result of this upper house elections, and they may turn out to be a thorn in the side for the Democrats.

(SOT) Susumu Kato, Managing Director & Chief Economist, Credit Agricole Corporate & Investment Bank.

“It may generate political instability for Japan. However, at the same time, it is very important to know that the DPJ will take more and more realistic economic policy measures. Previously the DPJ took a very expansional fiscal policy measures to increase subsidies to households, but I think that due to the loss of this upper house elections, the DPJ must take a more realistic economic policy measures.”

Equity markets here in Tokyo barely reacted to the news but the dollar yen ticked above 89 yen for the first time in two weeks. There were some immediate concerns that fiscal reform of the government agenda may be put on a backburner, but many analysts said over the longer term could be positive.

They argue that Japan, instead, could take a more pragmatic approach emphasizing growth over fiscal reforms, and that over the longer term could be beneficial in moving Japan's economy out of two decades of stagnation.

Saijal, back to you.

Meantime, South Korea's central bank revised its economic growth forecast for this year, moving it up to 5.9 percent from 5.2 previously.

It also trimmed the growth estimate for next year to 4.5 percent from a previous 4.8 percent.

For inflation, it's targeting between 2 - 4 percent on average through 2012.

Over in China, there are signs that government measures to cool the economy are paying off.

China's property prices snapped 15 months of gains, whilst bank lending eased in June - indicating that curbs on credit may lessen inflation pressures, even as record exports support growth.

According to news reports, June real-estate prices in 70 cities fell 0.1 percent from the previous month, and new lending came in at 89 billion dollars, the lowest in three months.

Andy Xie, an independent economist with his view on the latest data.

(SOT) Andy Xie, independent economist:

“The change was a matter of time. They needed to come back to a price-based tightening, i.e. by raising mortgage interest rate, and raising the positive rate to change the incentives for speculation. Unless they come back to this, otherwise the government will continue to lose credibility, and at some point, something really bad in the market will happen. and because at some point, the market will become so bad that there's no amount of money enough to keep it up, and it will tumble on its own."

China's also set to unveil a series of economic reports later this week.

They include Q2 GDP numbers, June inflation data, retail sales and foreign direct investment numbers.

The data will be watched closely to see whether Beijing has managed to avoid overheating. We will bring you the numbers as they are published.

Before we go, a quick look ahead to the US market trading day.

Alcoa, the largest U.S. aluminum maker kicks off the reporting season today, and comes under scrutiny as economic bell-weather on what to expect for the rest of the corporate sector.

The market's expecting Alcoa to swing back into profit and report earnings of 12 cents per share.

U.S. equities had rallied all last week; amid optimism that second-quarter earnings will justify the S&P 500's rebound from a 10-month low.

The market's expecting companies traded on the index to have increased profits by 34 percent in the April-June period.

Mikio Kumada, LGT Capital Management our next guest says the reporting season will show earnings growing faster than economy.

(SOT) Mikio Kumada, Executive Director, LGT Capital Management:

“For the short-term, I think people will be watching nervously because we've had a very volatile phase in the markets. But ultimately, I think what would matter is the constant flow of whether we get on balance disappointment or positive. Margins are very important, these things will come back, and I think, you know, overall people will realize that despite all the talk about the double dip, profitability is actually quite high.

Well, that wraps up today's business highlights.

I'm Saijal Patel from CNBC.

Have a good week!

All Rights Reserved. A Division of NBC Universal.