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Nikkei Markets

Asian equities post weekly gains on bets Fed to hold rates for now

Energy companies, Chinese automakers, Airlines among top performers

HONG KONG (Nikkei Markets) -- Asian shares outside of Japan advanced this week, helped by indications the Federal Reserve is unlikely to raise rates in the coming months and optimism over a US-China trade deal.

The Nikkei Asia300 Index closed 4.1% higher for the week. Energy and technology companies as well as Chinese carmakers and airlines were among the top performers.

Investors pinned their hopes on the U.S. and China reaching a trade deal after their latest round of talks. Following the discussions, which concluded Wednesday, China's Commerce Ministry released a positive statement and U.S. Treasury Secretary Steven Mnuchin reportedly said Chinese Vice Premier Liu He is expected to visit Washington later this month for further negotiations.

Louis Kuijs, head of Asia Economics at Oxford Economics, said "the vibes seemed positive" following the conclusion of the talks.

"It seems that for now President (Donald) Trump is interested in making progress towards a deal and we think it is likely that the U.S. will again suspend the increase in tariffs after the expiration of the first 90 days moratorium in early March," he said.

The appetite for equities was further boosted by Fed Chairman Jerome Powell's comments on last Friday that low inflation allowed the U.S. central bank to be more patient on rates. Those statements were further reinforced by the December Fed meeting minutes released on Wednesday. The minutes revealed that many policymakers were of the opinion that in light of the tame inflation and the recent financial market volatility, the "timing of future policy firming (was) less clear than earlier."

On the back of the Fed comments, the S&P 500 was up each day this week through Thursday. The U.S. benchmark gauge is headed for a third weekly advance.

In major movers this week, China Southern Airlines surged 16.2%, and Air China and China Eastern Airlines added at least 13.4% each, boosted by the Chinese yuan climbing to its highest in almost six months. Chinese carmakers and appliance companies were also in favor this week after China's National Development and Reform Commission Chairman said the nation plans to introduce policies to boost domestic spending on automobiles and home appliances. Hong Kong shares of Dongfeng Motor Group added 6.5% this week and Guangzhou Automobile Group jumped 12.1%, while Shenzhen-listed Midea Group advanced 7.7%.

Heavyweight technology companies rallied during the week on the back of Nasdaq Composite weekly advancing 3% till Thursday, which helped overcome disappointing December quarter guidance by Samsung Electronics. Hong Kong shares of Tencent Holdings rose 6.6%, Taiwan Semiconductor Manufacturing added 6%, and Samsung Electronics rallied 8.1%. Earlier in the week, Samsung's guidance of operating profit and revenue missed expectations of analysts polled by Reuters.

Singapore-based rig-builder Keppel Corp. gained 5.2% in the week. China Petroleum & Chemical (Sinopec) led mainland energy companies listed in Hong Kong higher with an 8.9% advance, and Thailand's PTT Exploration and Production climbed 4.1% after Brent crude oil raced past the $60 a barrel mark, its highest in a month.

On Friday, the A300 index closed 0.6% higher at 1,240.24.

Hon Hai Precision Industry edged 0.1% higher after saying December sales rose 12.5% on-year. Vietnam Dairy Products (Vinamilk) rose 1.7% after reporting a 30.5% increase in December quarter net profit.

India's biggest software company Tata Consultancy Services declined 2.4% on Friday after its December quarter profit margins disappointed investors.

--Nimesh Vora

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