* Risk appetite revived as geopolitical tensions ease
* Market talk of slower-than-expected Chinese inflation
* Shanghai stocks lead Asian markets higher
(Updates prices)
By Ian Chua
SYDNEY, Feb 14 (Reuters) - Asian stocks rallied on Monday,
snapping five straight sessions of losses, as talk of
slower-than-expected Chinese inflation helped drive Shanghai's
main share index to its best level in seven weeks.
European equity markets were expected to open higher, with
financial spreadbetters calling Britain's FTSE 100 up
0.2 percent, Germany's DAX up 0.3 percent and France's
CAC-40 up 0.5 percent.
Emerging Asia equity markets were among the best performers,
following a recent sell-off on worries about whether authorities
will be successful in tackling inflation.
"Ultimately I think they will be successful, but we probably
won't know that until mid-year or second half of the year. In
the meantime markets will be worried about it periodically,"
said Shane Oliver, head of investment strategy at AMP Capital
Investors in Sydney.
"Asian markets have had a sharp fall year-to-date. The good
news coming out of Egypt, which sparked a rally in the U.S. and
Europe has flowed through to Asia."
Egyptian President Hosni Mubarak has handed power over to
the army, bowing to escalating pressure from the military and
protesters demanding he goes. His departure helped ease
geopolitical tensions and partially revived investors' appetite
for risk.
The Nikkei climbed 1.1 percent, while shares
elsewhere in Asia gained 1.7 percent, bouncing
off 2-1/2 month lows set last Friday.
Australia's S&P/ASX 200 index rose 1.1 percent, Hong
Kong's Hang Seng index put on 1.1 percent and the
Shanghai Composite Index advanced 2.2 percent.
Traders said China's consumer price index may have risen 4.9
percent in the year to January, well below the consensus
forecast of 5.3 percent, a day ahead of the official release.
There was little reaction to data showing Japan's economy
shrank less than expected in the final quarter of last year.
Analysts expect a recovery this year on stronger exports to
China and other parts of fast-growing Asia.
Data on Monday showed China's imports rose 51 percent in
January, blowing past forecasts for a 28 percent rise,
underscoring the country's efforts to shift its economy towards
greater reliance on domestic consumption.
Last week, the MSCI Asia Pacific equity index, excluding
Japan, fell 2.65 percent, suffering its biggest weekly drop
since Aug. 2010.
Investors pulled out some $3 billion from Emerging Markets
Equity Funds tracked by EPFR Global in the week ended Feb. 9.
This marked a third straight week of outflows and was the worst
three-week run in three years, the fund tracker said.
But Japanese equities, which lagged the region last year,
saw some of the best inflows. Japan still has a low
price-to-book ratio of 1.2, according to Thomson Reuters
StarMine, among the most attractive in Asia. This compares with
2.0 for Hong Kong and 2.5 for Australia.
"Investors are seeing value in Japanese exporters geared to
fast growing regional emerging markets where the yen's value
versus the dollar is not an issue. Inflation is also not an
issue for the world's third largest economy," the fund tracker
said.
According to figures from Nomura, foreign investors have
bought $12.2 billion worth of Japanese stocks so far this year.
They sold $210 million of Asian stocks excluding Japan.
"Developed markets tend to be much better at dealing with
higher input costs from particularly commodities and energy,
because they're less sensitive to those factors," said Sean
Darby, chief Asian equity strategist at Nomura in Hong Kong.
In the currency market, the dollar eased against a basket of
major currencies. Versus the yen, it slipped 0.5 percent to
83.15 as Japanese exporters sold the greenback, taking
advantage of its rise last week to a three-week high.
U.S. crude steadied near $85.50 per barrel after
falling to 10-week lows, while copper edged up 0.7 percent to
$10,030 a tonne. Spot gold was little changed at $1,358
an ounce.
(Additional reporting by Emma Ashburn in Hong Kong; Editing by
Alex Richardson)
