* Corporate earnings, cbank reviews, to be key drivers
* Inflation in Asia running below previous cycles- Citi
* Flows into emerging mkt bond, equity funds continue-EPFR
* Euro stays near nine-week high on hawkish ECB, dovish Fed
By Saikat Chatterjee
HONG KONG, Jan 24 (Reuters) - Asian stocks outside Japan
struggled to hold on to early gains on Monday, as investors
remained wary before a slew of corporate earnings and a Fed
meeting this week expected to give a cautious readout on the
health of the world's biggest economy.
Concerns about rising inflation gave investors an excuse to
book profits in some Asian markets after strong rallies in 2010,
but rather than exiting the region funds were being reallocated
to countries seen as having a better grip on price pressures.
Profit-taking also hit the euro, which backed away from a
nine-week high, although easing concerns about Europe's
sovereign debt crisis gave some support to the single currency.
The MSCI index of Asia Pacific stocks outside of Japan
was flat on the day after being up nearly 0.3
percent in early trade.
It posted its worst weekly performance in nearly two months
last week and is down by 1 percent for the month. In contrast,
the Dow Jones industrial average is up 2.5 percent in the
same period.
"The Dow Jones gain on Friday and higher Asian stocks this
morning may provide positive support," said Parin
Kitchaotornpitak, a senior analyst at broker Far East Securities
in Bangkok. "But we still see some pressure from selling by
foreign investors."
Japan's Nikkei average rose 0.5 percent, with
resource shares popular and recently beaten-down exporters
bought amid expectations of robust earnings reports from
Japanese firms this week.
The euro stayed above the $1.36 line, having burst
through the key resistance level last Friday, helped by hawkish
comments from the European Central Bank chief Jean-Claude
Trichet which gave markets an excuse to cut short euro
positions.
That is in sharp contrast to the Fed, which is likely to
leave policy unchanged at a review on Wednesday and note a
slight improvement in the economy's outlook. .
The euro has rallied some 6 percent in the past two weeks on
demand from Asian central banks, traders said. .
INFLATION, WHAT INFLATION?
While sellers targeted stocks in India, China and Indonesia
last week, on worries that authorities were being too slow to
tighten policy, Citigroup strategists said inflation was running
at a lower level than seen during previous cycles.
Markus Rosgen, head of Asia ex-Japan strategy at Citigroup,
said inflation in Asia typically tends to pick up during this
stage of the economic cycle as economies grow into their excess
capacity, only to eventually subside.
Rosgen recommends buying North Asia and cyclical stocks and
avoiding South Asia, consumer and utility sectors.
Moreover, the broad MSCI Asia Pacific ex-Japan 12-month
forward price/earnings ratio is still below the long-term
average, indicating valuations still remain attractive,
according to Thomson Reuters data, while inflows into emerging
markets have persisted.
Data for the third week of January from fund tracker EPFR
Global showed inflows into emerging market equity and bond funds
have continued, with a total of $101 billion flowing into
emerging market equity funds since the start of 2010.
Even markets such as Indonesia, which bore the brunt of the
selling last week, stabilised.
Spot gold rose around 0.7 percent to above $1,351 per
ounce, after posting its third consecutive weekly loss.
.
U.S. crude futures held above the $89 a barrel mark,
on renewed confidence that developed economies are recovering
and will boost demand for commodities.
U.S. Treasury yields <0#USBMK=> rose slightly as the market
braced to absorb a total of $99 billion in fresh supply later in
the week. Ten-year Treasury yields were up 2 bps on the day,
just below a two-week high of 3.47 percent hit last week.
(Additional reporting by Umesh Desai, Viparat Jantraprap in
BANGKOK, Ayai Tomisawa in TOKYO and IFR Markets; Editing by Alex
Richardson)
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