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Asian markets ‘euphoric’ in wake of Indian elections

Asian stocks climbed for the third week in four as an election victory by India’s ruling party spurred optimism economic reforms will follow and Goldman Sachs Group Inc became more bullish on commodities companies.

India’s SENSEX index soared 14 percent, the steepest weekly advance since March 1992. ICICI Bank Ltd, India’s second-largest bank, and Tata Steel Ltd, India’s biggest producer, rose more than 20 percent. Japanese trading house Mitsubishi Corp climbed 3.7 percent as Goldman lifted the stock to “buy” and said oil prices are likely to continue rising.

“Markets are euphoric,” said Rahul Chadha, the Hong Kong-based head of Indian equities at Mirae Asset Global Investment, with US$46 billion in global equities. “The focus by federal and state governments on development will lead to a structural re-rating of India.”

The MSCI Asia-Pacific Index jumped 2.1 percent this week to 99.35. Asian markets have rallied 41 percent since the MSCI benchmark dropped to a more than five-year low on March 9.

Japan’s Nikkei 225 Stock Average lost 0.4 percent, a second consecutive weekly decline. Benchmark indexes throughout the region climbed, except in Australia, New Zealand, Pakistan and China.

MSCI’s Asian index plunged by a record 43 percent last year as the credit crunch tipped the world’s largest economies into recession, forcing companies to cut jobs amid slumping profits.

The gauge has rallied since March on optimism government measures to ease the financial crisis are working. Earnings estimates for companies included in the MSCI benchmark started to rise in April after falling for almost a year, data compiled by Bloomberg show.

Taiwanese share prices are expected to move in quiet trade next week ahead of a prolonged Dragon Boat Festival holiday, dealers said.

Fears of possible negative news to emerge from foreign markets during the holiday are expected to drive investors in Taipei to the sidelines and drag down daily turnover, they said.

As the market has scored significant gains recently, institutional investors tend to pocket profits before new buying opportunities appear, the dealers added.

Technical resistance will turn heavy next week as the market moves closer to the key 6,800 level, while bargain hunters are expected to help the market weather pressure at around 6,500, dealers said.

In the week to Friday, the market rose 248.20 points, or 3.82 percent, to 6,737.29 after a 1.44 percent fall a week earlier. Average daily turnover stood at NT$189.36 billion (US$5.8 billion), compared with NT$170.52 billion a week ago.

The market will be closed on Thursday and Friday for the public holiday.

Cautious sentiment had dominated trade in the past few sessions, Concord Securities (康和證券) analyst Allen Lin said, with profit-taking compromising earlier upside.

“The market has become technically unstable following a recent strong showing. I expect more and more investors will retreat from the trading floor, waiting for new hints,” Lin said.



Other markets on Friday:

SYDNEY: Down 1.37 percent. The S&P/ASX 200 shed 52.3 points to 3,761.6.

SHANGHAI: Down 0.50 percent. The Shanghai Composite Index, which covers A and B shares, lost 13.02 points to 2,597.60.

SEOUL: Down 1.26 percent. The KOSPI ended slipped 17.90 points to 1,403.75.

MUMBAI: Up 1.1 percent. The 30-share SENSEX closed 150.61 points higher at 13,887.15.

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