Bank shares outshine broader markets in Japan, China

Some Asian bank shares traded higher Monday, outpacing broader markets, as investors focused on hopes for improved earnings in Japan and long-awaited index futures trading in China.

For the month of April, “we reconfirm our outlook for upside risk from raising profit outlooks” for Japan’s major banks, Barclays Capital bank analysts Shin Tamura and Miwako Tani said in a recent report.

In May, banks’ share prices should get support from quarterly earnings results “as many banks are likely to beat outlook targets on lower credit costs and healthy bond investment returns,” they said.

“There is also a possibility of sustained upside risk for banks with profit-growth outlooks” for the new Japanese fiscal year that will begin in April, they said, “primarily on lower credit costs, as investors discount for new targets.”

Mitsubishi UFJ Financial Group Inc. /quotes/comstock/!8306 (JP:8306 480.00, +9.00, +1.91%) /quotes/comstock/13*!mtu/quotes/nls/mtu (MTU 5.16, +0.06, +1.18%) rose 4%, Mizuho Financial Group Inc. /quotes/comstock/!8411 (JP:8411 195.00, +1.00, +0.52%) /quotes/comstock/13*!mfg/quotes/nls/mfg (MFG 4.05, -0.17, -4.03%) was up 1.1%, and Sumitomo Mitsui Financial Group Inc. /quotes/comstock/!8316 (JP:8316 2,978, +26.00, +0.88%) /quotes/comstock/11i!smfjy (SMFJ.Y 3.15, -0.02, -0.63%) added 5.2%.

Mitsubishi UFJ’s shares also got a lift from a Japanese media report that the megabank and U.S. financial services giant Morgan Stanley /quotes/comstock/13*!ms/quotes/nls/ms (MS 28.85, -0.06, -0.21%) will launch their domestic brokerage joint venture on May 1.

Japanese business daily Nikkei reported that a final decision is expected as soon as Tuesday and marks the start of their brokerage alliance, roughly 1-1/2 years after the Japan’s largest lender gave Morgan Stanley a finding boost worth over 900 billion yen ($9.09 billion).

Bank shares gained even as the benchmark Nikkei 225 Average and the broader Topix 1000 both slipped 0.2%, weighed down as many stocks reached their ex-dividend dates, after which investors can no longer receive the annual dividend for their holdings. That prompted some investors to sell those shares.
China banks keen on futures

Outside of Japan, mainland Chinese financial shares were among the top advancers in Hong Kong and Shanghai.

Many Chinese banking shares have underperformed the broad market in recent weeks on worries about Chinese monetary tightening. However, the fortunes of mainland bank stocks turned upward, following news late Friday that China’s top two exchanges will launch the trading of stock futures April 16.

The news was largely responsibly for sending the Shanghai Composite up 2% by the midday break, while in Hong Kong, the benchmark Hang Seng Index was up 0.8%, and the Hang Seng China Enterprises Index was higher by 1.4%.

The China Securities Regulatory Commission announced the move, which will open trade on futures based on an index of 300 yuan-denominated stocks traded on the Shanghai and Shenzhen bourses.

Analysts had said the long-anticipated launch was a key milestone in the development of China’s equities markets. See full story on Chinese stock-futures trading.

Bank of China Ltd. /quotes/comstock/28c!e:601988 (CN:601988 4.36, +0.13, +3.07%) /quotes/comstock/22h!e:3988 (HK:3988 4.08, +0.09, +2.26%) /quotes/comstock/11i!bachy (BACH.Y 12.80, -0.05, -0.39%) gained 2% in Hong Kong and 2.8% in Shanghai.

China Construction Bank Corp. /quotes/comstock/28c!e:601939 (CN:601939 5.73, +0.15, +2.69%) /quotes/comstock/22h!e:939 (HK:939 6.20, +0.11, +1.81%) /quotes/comstock/11i!cichf (CICHF 0.78, -0.01, -0.64%) which announced 2009 results generally in line with expectations, advanced 1.5% in Hong Kong and 2.5% in Shanghai.

However, “the market’s enthusiasm may remain capped by expectations of further Chinese tightening. Still focusing on the risk of property bubbles, the CBRC [China Banking Regulatory Commission] asked banks to tighten real-estate loans, particularly those loans to developers that have used land as collateral without actually having begun to build on those lands,” said Sebastien Barbe, head of emerging-market research at Credit Agricole CIB in Hong Kong.

Also, he said, China’s Purchasing Managers’ Index report, due Thursday, is expected to have rebounded from 52.0 to 55.0.

“Such a strong number would likely fuel tightening expectations further, and Chinese asset markets may not like it too much,” he said.

Elsewhere in Asian trading, Australia’s S&P/ASX 200 was up 0.1% but South Korea’s Kospi slipped 0.1%.

Source: Market Watch