Shares in China and Hong Kong were higher by midday on Thursday, extending the previous session's gains, as airlines were lifted by a stronger yuan, and Li & Fung surged on an upbeat U.S. consumer spending outlook.
Overall, the mood remained cautious as investors awaited China's next moves aimed at cooling inflation, which accelerated to a 25-month high in October. Some dealers said they expected a rate rise this week, and for further developments on the Korean peninsula.
A number of initial public offerings and dollar debt sales in Asia have been delayed because of bearish markets in recent days.
More than $3 bln worth of proposed IPOs in Hong Kong were deferred, while Hongkong Electric Holdings Ltd put off pricing its 10-year dollar bond until next week. Other Chinese borrowers were monitoring the market.
"Usually, if there is a lot of hot money coming to Hong Kong, these IPOS should be doing well," said Belle Liang, research head at Core Pacific-Yamaichi. "IPOs are being delayed or withdrawn because of lacklustre demand."
The Hang Seng Index was up 1% at 23,260.11 by the midday trading break, extending the previous session's 0.6% rise.
Dealers expect the bearish tone to prevail until some hurdles have been cleared, including an interest rate rise in China.
One of the actively-traded stocks, consumer goods exporter Li & Fung Ltd rose 4.6% on an improving outlook for the U.S. economy as shown by recent upbeat jobs data and optimism about Thanksgiving consumer spending.
United Company RUSAL Ltd gained 2.1%. The world's top aluminium maker by output said it planned to buy a 33% stake in a Chinese aluminium trader to improve sales and strengthen its market position in China.
Debutant Kingworld Medicines Group Ltd rose 29% versus its IPO price, on expectations the distributor of imported healthcare products in China will benefit from strong consumer spending fuelled by an economic growth.
AIRLINES SOAR IN SHANGHAI
China's key stock index rose 0.94% in active trading, with investors buying back into banking and property plays.
Fears of further monetary tightening steps, which had prompted investors to dump large-cap issues, had triggered a near 10% fall in the past two weeks. But worries eased as the People's Bank of China signalled a tentative pause of such measures.
The central bank auctioned three-month and three-year bills at unchanged yields in its open market operations on Thursday, easing fears of further monetary tightening.
The central bank is also poised to inject a net 54 bln yuan ($8.1 bln) into the banking system this week, stepping back from weeks of liquidity tightening including bills sales and bank reserve requirement increases.
The Shanghai Composite Index was trading at 2,886.68, with most of the gains posted in the last half an hour of trading before the midday break, when the index edged above its 250-day moving average, now at 2,884, points.
"This is only a technical rebound, much larger jumps are unlikely. Property and bank shares have fallen far too much in the past month," said Wen Lijun, analyst at Nanjing Securities.
Banks were the most actively traded stocks. China Everbright Bank Co surged 5.3% after saying it planned to buy a trust firm.
Industrial and Commercial Bank of China Ltd fell 1.4%, after a 10% drop on Wednesday when the world's largest lender resumed trading following a rights issue and played a catch-up with the recent market decline.
Shanghai's property sub-index gained 2.4% with top developer China Vanke Co up 4.1%.
Specific sectors such as airlines added to broader gains. Retail investors bought airlines on expectations a strong yuan would cut costs of imports such as aircraft purchases. The yuan has risen 2.6% this year.
Air China Ltd and China Southern Airlines Co both gained 2.9%.
In Hong Kong, China Eastern Airlines Corp Ltd rose 2.3% and China Southern gained 1.7%.
Hainan Airlines Co rose 5.7% after media reports the tourist island of Hainan was set to implement a tax rebate for foreign tourists from next year.
Volume picked up slightly from lacklustre levels since the start of November, with turnover of Shanghai A shares rising to 97 bln yuan from 78 bln yuan by midday Wednesday.
