* Chinese shares up 1.6 pct; Nikkei briefly tops 10,000
* Long-only Funds seeing buying China shares
* Thai shares jump, currency rises after election results
* Asia-focused equity funds snap outflow streak - EPFR
By Saikat Chatterjee
HONG KONG, July 4 Asian equities climbed a fifth
consecutive session on Monday, led by Chinese stocks, though the
euro turned lower after ratings agency S&P warned that any
rollover of Greek's debt would constitute a default.
After two weeks of gains, equities were on a
strong footing as fears eased about a sharp slowdown in emerging
market giants such as China and a drop in commodity prices like
oil boosted demand for risky assets after a rocky first half.
One trader at a Hong Kong-based brokerage said long-only
buyers were stepping back into the market, signalling a shift
from the prior quarter where institutions were largely on the
sidelines and trading volumes on major exchanges stayed anemic.
The Shanghai composite index, which is still down
year-to-date, rose 1.6 percent on Monday after data last
week showed China's manufacturing growth moderated in June,
raising expectations that the economy may not be heading into a
sharp slowdown due to excessive tight monetary
A U.S.-based macro fund was also spotted buying into Chinese
banks - a sector often considered a proxy for the economy and
one which has a large enough weighting to lift the broader
The China Enterprises index of top mainland firms
listed in Hong Kong, the most common way for foreign investors
to invest in China, rose 2.2 percent.
"There has been a significant multiple contraction in PE
(price-earnings) terms which means that market (China) is
emblematic of the overall cheapness of the region," said
Jonathan Garner, head of global emerging markets strategy at
"So we do expect China to do better both in absolute and
relative terms in the second half," he said, adding that the
bank is overweight on the materials, energy and financial
Though headline PMI data dipped, underlying investment
trends remain strong and inflation is set to ease in the second
half following a moderation in economic activity, Merrill Lynch
They expect the Chinese economy to grow by more than 9
percent in 2011 -- much higher than a so-called "hard landing"
scenario growth of around 7 percent.
Offering yet another ray of optimism for cautious-minded
investors was a batch of U.S. manufacturing data that suggested
the world's biggest economy may be recovering strongly from a
recent spell of weakness.
Japan's Nikkei ended up one percent, briefly rising
above 10,000 points level for the first time in two months,
while Australian stocks gained 0.4 percent.
The MSCI index of Asia-Pacific shares outside Japan
rose 1.2 percent, touching its highest level
since early June, adding to two consecutive weeks of gains.
In Thailand, the baht strengthened and local shares
gained more than 4 percent after the clear majority
obtained by the Puea Thai party suggested that possibility of
post-election instability looked less likely in the short-term.
Flows data painted a cheery picture. EPFR
Global-tracked Emerging Markets Equity Funds snapped a three
week outflow streak heading into July with Asia ex-Japan and the
diversified Global Emerging Markets (GEM) Equity Funds both
taking in over $1 billion while outflows from high yield bond
U.S. markets are shut on Monday for a holiday.
The euro erased early gains and held near the day's
lows after ratings agency S&P said a debt rollover plan may put
Greece in a selective default. The single currency had reached a
one-month high of $1.4580 earlier in the day
Moreover, even though the latest disbursal of emergency
funds calms nervous investors for now, Greece faces an uphill
task in trying to implement the reforms demanded by
international lenders which means the euro's path will be a
Broadly, it remained hemmed inside a broad range established
since early May.
Euro zone finance ministers on Saturday approved a 12
billion euro instalment of Greece's bailout and said details of
a second aid package for Athens would be finalised by
For now, markets will focus on a European Central Bank
policy rate decision on Thursday where it is widely expected to
raise interest rates though players will be more interested in
knowing the future trend of rate hikes, particularly in the
backdrop of weak data from Germany.
Improved appetite for risk and the end of the Federal
Reserve's quantitative easing policy reduced demand for U.S.
Treasury bonds, with yields on 10-year notes
settling at 3.18 percent, near its highest in almost two months
and adding to a weekly rise of more than 30 basis points.
U.S. crude futures CLc1 were trading above the $95 per
barrel mark, holding on to last week's gains, despite a surprise
move by the 28-nation International Energy Agency to release 60
million barrels of oil reserves.
Elsewhere, precious metals like gold and silver
eked out meagre gains in thin trading.
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(Additional reporting by Vikram Subhedar; Editing by Richard