8-23-13 4:45 AM EDT | Email Article

By V. Phani Kumar, MarketWatch


HONG KONG (MarketWatch) -- Japanese stocks led most Asian markets higher Friday, cheering gains on Wall Street and a weakened yen, while Chinese stocks retreated amid concerns about liquidity conditions.


Japan's Nikkei Stock Average was the region's strongest performer, jumping 2.2% as the U.S. dollar (USDJPY) briefly climbed above the Yen99-level.


Also climbing, Australia's S&P/ASX 200 gained 0.9%, South Korea's Kospi added 1.1% and Taiwan's Taiex rose 0.8%.


Reversing early gains, Hong Kong's Hang Seng Index dropped 0.2% and China's Shanghai Composite gave up 0.5%.


The region's broad advance follow a period of uncertainty surrounding the Federal Reserve's bond-purchase program, with emerging markets in particular hit by worries that reduced stimulus from the U.S. central bank would spur foreign fund outflows from the region.


ING Financial Markets economist Tim Condon said a tapering of the $85 billion-a-month in Fed stimulus could result in a rapid repricing of U.S. Treasury yields, lifting the 10-year yield (10_YEAR) by about 1.50 percentage point in about two quarters.


However, "once it's over, the economic fundamentals ... will reassert themselves as the drivers of financial-asset prices. We're not there yet, and contagion could still cause a balance-of-payments crisis in an emerging market with a too-large current-account deficit," Condon said.


Friday's performance helped the Nikkei Average and the S&P/ASX 200 erase losses they had accumulated earlier in the week. But the Shanghai Composite, the Hang Seng Index and the Kospi suffered losses of between 0.5% and 2.9%.


Stock movers


Stock gains in Tokyo were spread across sectors. Kawasaki Heavy Industries Ltd. (KWHIF) added 4.9%, Kobe Steel Ltd. (KBSTY) rose 4.6%, Toshiba Corp. (TOSYY) advanced 4.2%, Nissan Motor Corp. (NSANY) finished 3.4% higher and Sumitomo Mitsui Financial Group Inc. (SMFJY) climbed 2.7%.


A Reuters report Friday cited a survey results as showing that local manufacturers' optimism rose to the highest level in three years.


The region's broad advances followed a higher finish for the Dow Jones Industrial Average (DJI), which snapped a six-day losing streak overnight after a monthly average of jobless claims fell to a more than five-year low in the U.S., and as manufacturing Purchasing Managers' Index readings from China and Germany indicated expansion.


"The fact that the U.S. and European recoveries are improving (albeit fractionally) is a good foundation for global markets, but investors firstly have to get through the removal of the price distortions that quantitative easing created," said Perpetual investment market-research chief Matthew Sherwood.


Meanwhile, Chinese stocks fell amid worries over tightening liquidity.


China Merchants Bank Co. (CIHKY) lost 3.2% in Shanghai and 1.1% in Hong Kong on its planned rights share issue to raise about 34.9 billion yuan ($5.7 billion).


Other mid-sized banks also declined, with Industrial Bank Co. losing 2% and China Minsheng Banking Corp. (CMAKY) shedding 1.5% in Shanghai, while Ping An Bank Corp. dropped 3% in Shenzhen.


Some Hong Kong-listed stocks found buying support after reporting earnings. Kunlun Energy Co. (CNPXF) added 3.2% after the company posted a 5% increase in its first-half profit, while Henderson Land Development Co. (HLDCY) advanced 2.6% despite a modest decline in its profits.

-V. Phani Kumar; 415-439-6400; AskNewswires@dowjones.com


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(END) Dow Jones Newswires

08-23-13 0445ET

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