Higher commodity prices this week supported mining and energy-related stocks in Asia, though investors were reluctant to take big bets on increasingly expensive shares until more evidence emerged of a sustained recovery.
The MSCI index of Asia Pacific stocks outside Japan rose 0.5 per cent to its highest since October 6, on its way for a third consecutive month of double-digit percentage gains.
Japan's Nikkei average hit its highest level in over 7 months on Friday, buoyed by shippers and commodities-linked shares, on the expectation of growing demand from China.The benchmark Nikkei was trapped in a narrow range for most of the day but surged over resistance at 9500 to close at 9522.50, its highest level and highest close since November 5. It gained 71.11 points.
Hong Kong's Hang Seng index slipped 0.3 per cent after opening at an eight-month high.
"The firmness in stocks has boosted Japanese retail investors' risk appetite," said Tsutomu Soma, a senior manager in the foreign securities department at Okasan Securities, adding that household investors' money is also flowing out of the country through pension funds.
"Profit-taking in overseas currencies may temporarily lift the yen, but the downward trend in the yen is likely to stay intact," Soma said.
The Reuters-Jefferies CRB index, a global commodities benchmark, was up 12.3 per cent in May, on its way to the biggest monthly gain since July 1974.
"Gains in commodities reflect continued recovery of demand outlook from its collapse after Lehman's bankruptcy triggered concerns of a depression," said Dariusz Kowalczyk, chief investment strategist with SJS Markets in Hong Kong.
"Medium-term outlook remains positive for commodities and other risky asset classes as we continue to expect that US GDP will start to expand in Q3 and several major Asian economies already in Q2," he said in a note.
Asia has continued to lead a global equity rally that began on March 9. The MSCI index has surged 51 per cent since March 9 while the all-country world index has climbed 30 per cent.
