Asian Stocks Shine, China Inflation Data Eyed

Asian stocks rallied on Monday, snapping five straight sessions of losses, as talk of slower-than-expected Chinese inflation helped drive Shanghai's main share index to its best level in seven weeks.

The Shanghai Composite Index closed up 2.5 percent, posting its best daily performance in two months on Monday, as talk of slower-than-expected inflation in January suggested to investors that more policy tightening could be postponed.

Traders said China's consumer price index may have risen 4.9 percent in the year to January, well below the consensus forecast of 5.3 percent, a day ahead of the official release.

Strong trade dataalso supported a picture of healthy growth. Imports surged in January, growing 51 percent from a year earlier and easily beating expectations, while export growth was also strong, underlining the strength of the economy.

The upbeat Chinese data helped to boost Japan's Nikkei 225 . It to a nine-month high on Monday. Maritime transport and construction equipment stocks attracted buying.

The benchmark Nikkei ended up 1.1 percent or 119.89 points at its intraday peak of 10,725.54, its highest since May 6, 2010.

Japan's economy shrank slightly in the final quarter of 2010. GDP was down a less-than-expected 0.3 percent from the previous quarter, hurt by an expiry of government incentives for car purchases and a slowdown in exports. It was the first contraction in five quarters, and translated into an annualized contraction of 1.1 percent.

The latest GDP figures also confirmed that China overtook Japan as the world's second-largest economy in 2010 on a seasonally unadjusted, nominal dollar basis, at $5.8786 trillion against $5.4742 trillion.

Shippers outperformed, with Mitsui OSK Lines gaining 3.8 percent. Construction equipment stocks were also strong, with Komatsu and Hitachi Construction Machinery gaining.

Seoul shares gained 1.9 percent on Monday after substantial falls in the previous session, helped by rallies in key blue chip technology counters including Samsung Electronics.

Samsung Electronics jumped 4.2 percent, breaking a five-session losing streak following the launch of its new Galaxy Tab and Nokia'sbelated attempts to catch up in the smartphone market.

Other technology plays also advanced. LG Electronics rallied 4.7 percent and Hynix Semiconductor rose 3.1 percent.

But STX Offshore & Shipbuilding tumbled 11.2 percent after news that Royal Caribbean Cruises had signed a letter of intent to build a new generation of ships with Meyer Werft. STX Offshore participated in bidding for the order.

Auto plays posted firm gains, with Hyundai Motor , the country's biggest automaker, and Kia Motors both advancing.

Australia's S&P/ASX 200 rose 1.1 percent on Monday to 10-month highs, with top banks and miners rallying and heavyweight BHP Billiton at its highest level since May 2008 as investors prepare for the miner's half-year earnings report this week. Miners, already supported by easing
tensions in the Middle East, also got a boost from the unexpected rise in China's January copper imports.

Leighton, Australia's biggest contractor, reversed early losses to end up 0.9 percent at A$30.97 despite cutting its full-year forecast by 6 percent due to recent Australian floods.

Insurance Australia Group , the nation's top home and car insurer, fell 4 percent to A$3.63 after it warned its first-half net profit will more than halve as its UK operations struggled and weather claims mounted.

Chinese automotive stocks in Hong rose sharply on Monday ahead of anticipated strong January sales in China's auto market, now the world's largest, and upbeat earnings forecasts.

Greatwall Motor , China's largest sport-utility vehicle maker, and Dongfeng Motor Group were up by as much as 7.8 percent in early trade, while Geely Automotive Holdings .

Southeast Asian markets also rose. The Straits Times Index closed up 0.9 percent. The government said it would take additional steps to cool its private housing market if necessary. Shares of Capitalandrose 0.9 percent.

The FTSE CNBC 100 Index was up nearly 2 percent.