China stocks lead Asia, as Japan pulls back

HONG KONG (MarketWatch) � Most Asian markets advanced Monday after a corporate-results-driven rally on Wall Street and amid a positive earnings outlook for Chinese firms, although Japanese stocks fell from near three-year highs as investors took profit.

The Shanghai Composite Index CN:000001 �jumped 1.6% to 2,328.71, while Hong Kong�s Hang Seng Index HK:HSI �climbed 0.5%, and Taiwan�s Taiex XX:Y9999 �gained 0.4%.

Japan�s Nikkei Stock Average JP:100000018 �briefly topped 11,000, reclaiming the milestone for the first time since April 2010, before retreating as profit-taking kicked in. The benchmark was down 0.5% at 10,871.37 in early afternoon trading in Tokyo.

The Kospi KR:SEU �also shed 0.5% in Seoul, while markets in Australia were closed for a holiday.

The advances for Chinese shares came amid a relatively positive earnings outlook, even as data released Sunday showed profit at major Chinese industrial enterprises grew by only 5.3% in 2012, nearly one-fifth of the 25.4% jump seen the previous year.

A 17.3% jump in December profits, fueled by better earnings momentum in the last quarter of the year, helped improve the latest annual figure.

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Lu Ting, a China economist at Bank of America Merrill Lynch, said the current momentum could lift earnings growth to around 25% in the first half of 2013, before moderating in the second half of the year, although the fluctuations in profitability could affect market movements.

�The wild swing of industrial enterprises� earnings growth could lead to even bigger movements of stock markets on simplistic extrapolation. Investors� confidence could be overly dampened during the downturn, but might also show irrational exuberance during the earnings upturn,� Lu said.

The broad regional gains came as improved profits at Procter & Gamble Co. and other firms on Friday pushed the Dow Jones Industrial Average DJIA �higher for the 11th time in 12 sessions and lifted the S&P 500 index SPX �to its first finish above 1,500 since late 2007.

In Asian trading Monday, Dow industrials futures were up 0.1%, or 17 points, at 13,829, while S&P 500 futures climbed 0.1% to 1,496.80.

Stock movers

Automobile, construction and financial stocks were among the major gainers on mainland Chinese bourses.

Developer Beijing North Star Co. CN:601588 �BEIJF climbed by the day�s 10% limit, and China Minsheng Banking Corp. CN:600016 �CMAKY �added 5.4% in Shanghai. In Shenzhen, Guoyuan Securities Co. CN:000728 �gained 4.7% and Chongqing Changan Automobile Co. CN:000625 advanced 4.7%.

Shanghai-traded shares of Dongfeng Automobile Co. CN:600006 rose 8.1% following news that Swedish truck maker Volvo AB is planning a joint venture with the Chinese firm to produce heavy vehicles.

Aviation-related stocks also jumped following reports that a home-grown Chinese army-transport aircraft completed its maiden flight over the weekend. China Aerospace Times Electronics Co. CN:600879 rose 5.8% in Shanghai, while AVIC Aircraft Co. CN:000768 � soared by the day�s 10% limit in Shenzhen.

The Hong Kong-listed shares of China Minsheng HK:1988 �and Beijing North Star HK:588 �added 2.4% and 7.4%, respectively.