* Shanghai composite index leaps 6 pct, pulling Asia up
* MSCI world stocks index hits 23-month low overnight
* Oil, metals edge up, dollar struggles
(Repeats to more subscribers, updates prices, adds quote)
By Kevin Plumberg
HONG KONG, Aug 20 (Reuters) - Most Asian stock markets
edged higher on Wednesday, rebounding from a two-year low as
Chinese shares surged on hopes for policies from Beijing to
jumpstart growth, though many analysts said it was a long shot.
The dollar struggled as crude oil crept above $115 a barrel
and gold prices edged higher, taking some of the steam out of
the U.S. currency's recent surge to a seven-month high.
World stock markets slid to the lowest since September 2006
on Tuesday, with investors increasingly sceptical about
earnings expectations for 2009 given the mixed results so far
in 2008 and constant reminders about instability in the
financial sector.
However, most Asian indexes turned higher as cheap
valuations proved irresistable, especially with markets rife
with chatter about fiscal stimulus in China.
"Bargain hunters have returned to the market on talks that
a rescue package is on the way," said Francis Lun, general
manager from Fulbright Securities in Hong Kong. "We are all
waiting for a miracle," Lun added.
Hong Kong's Hang Seng index <> rose 1.9 percent, after
closing at a one-year low on Tuesday, with shares of China
Mobile <0941.HK> providing the biggest boost.
Shares of Asia's largest wireless carrier, up 2 percent,
hit a one-year low before the rally swept through the region.
The Shanghai composite index <> surged 6 percent after
touching a 20-month low. The index is watched by many global
investors as a gauge of risk taking and a leading indicator for
the world's fastest growing economy.
The MSCI pan-Asia equities index <.MIAS00000PUS> edged up
0.3 percent after earlier plumbing the lowest since July 2006.
The MSCI all-countries world index <.MIWD00000PUS> on
Tuesday tumbled to a 23-month low, down 18 percent
year-to-date.
Japan's Nikkei share average <> rose 0.2 percent,
tagging along for the rally, with retail companies like
clothing chain operator Fast Retailing Co Ltd <9983.T> paving
the way higher.
TOO EARLY FOR FISCAL STIMULUS IN CHINA?
Despite the sudden turnaround in Asian stocks, apprehension
about the earnings outlook was rife, especially after the Bank
of Japan on Tuesday described the world's second-largest
economy as "sluggish" -- a term it has not used since the Asian
financial crisis a decade ago.
Donald Straszheim, vice chairman of Roth Capital Partners
in Los Angeles and a long-time China analyst, said the Chinese
stock market, the worst performer this year, will continue to
fall because of the toxic concoction of slowing growth and high
inflation.
He expects earnings to rise 15 percent in China this year,
down quite sharply from 30 percent to 45 percent pace enjoyed
by most sectors in 2006 and 2007.
"Shanghai has proven to be a very emotional market, and is
likely to stay that way," said Straszheim in a note to clients.
Stephen Green, head of China research with Standard
Chartered Bank in Beijing, said that given economic growth is
still expected to stay above 8 percent this year and next, it
is too early for the government to squeeze its budget to boost
growth.
Rather, Beijing should consider relaxing loan quotas to
stimulate bank lending to support growth.
"It is too early for a fiscal stimulus package, and we
should be responsible about calling for one," he said in a
research note. "There is still room for monetary policy before
we try fiscal policy."
Central bank officials have been struggling to balance
concerns about rapidly slowing growth rates around the world
with persistent inflation.
Two Federal Reserve officials known for their tough stances
against price pressures stressed overnight the central bank has
to be prepared to raise interest rates to keep inflation at bay
if slowing growth does not do the trick. []
"Until we have a clear sense of what will prevail, monetary
policy-makers must remain poised to act if slowing growth fails
to contain inflationary pressures," said Richard Fisher,
president of the Dallas Fed.
Higher borrowing costs might be the last thing that
corporate management wants at a time when consumer demand is
drying up.
After weeks of liquidation of positions in the metals
markets, which have helped to push up the U.S. dollar,
investors slowed down to survey the scene.
The euro was largely unchanged at $1.4773 <EUR=>, but was
up from a six-month low around $1.4630 hit on Tuesday.
The dollar rose 0.2 percent to 109.85 yen <JPY=>, though it
was struggling to test a seven-month high of 110.67 yen reached
last week.
Metals markets were relatively quiet compared with the last
few days. Gold rose 0.3 percent in the spot market to $815.95
an ounce <XAU=>, spending only a few days trading below $800.
The September U.S. light crude contract <CLc1> rose 37
cents to $114.90 a barrel, gravitating around the $115 mark.
Oil is still up 20 percent so far this year but its sharp
decline in the last month on expectations for slowing demand
has stung a variety of investors from institutions to hedge
funds.
U.S. gasoline inventory data due later in the day is
expected to show a fourth consecutive weekly decline.
