* Asia stocks hit 7-month high, powered by Taiwan surge
* Aussie at 7-mth peak as risk appetite stays strong
By Eric Burroughs
HONG KONG, May 4 (Reuters) - Asian stocks punched to a
seven-month peak on Monday, fuelled by confidence the global
economy is recovering faster than expected and on a further
jump in Taiwanese shares on hopes for an influx of Chinese
investment.
Taiwan's benchmark TAIEX index <> soared 6 percent,
taking gains to 13 percent in just two days as investors see a
wide-reaching deal coming later in the year as spurring heavy
Chinese investment in the island, especially in financial
firms. []
The surge in Taiwan added to the broad gains across Asia as
evidence has mounted that global trade is starting to pick up,
highlighted last week by brokerage CLSA's gauge of Chinese
manufacturing activity rebounding to a nine-month high in
April. []
The Australian dollar, seen as the currency market's
bellwether for risk-taking, struck a seven-month peak while
safe-haven government bonds retreated.
Data last week in Asia showed South Korean exports and
industrial production both improving more quickly than
expected, suggesting that regional exporters are needing to
step up activity after having aggressively slashed inventories
of goods.
Investors are also feeling more confident that the U.S.
financial system has already suffered the worst of its crisis
and is getting healthier, just before the government releases
the results of stress tests later this week.
"Bank earnings are coming out fine and investors
increasingly believe the result of the U.S. banking sector's
stress test will be tolerable," said Kim Hak-kyun, an analyst
at Korea Investment & Securities in Seoul.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> was up 3.7 percent, its highest level since
mid-October and taking its two-month rally to 44 percent from
the low hit in early March. Financial and technology shares
powered the rise.
On Friday the U.S. S&P 500 <.SPX> edged up 0.5 percent, and
S&P futures <SPc1> were pointing to a further rise later in the
day.
Trading was active even with Japanese financial markets
closed on Monday for the first of three straight holidays, part
of the country's Golden Week break. Many other markets in the
region reopened after labour day holidays.
AUSSIE RUN EXTENDS, KOREAN BONDS FALL
The Australian dollar <AUD=D4> climbed 0.7 percent to
$0.7353 and hit a seven-month high of $0.7390 as market players
favoured the currency still offering a 3 percent yield in a
world where U.S. and Japanese short-term yields are pinned near
zero.
The dollar edged up 0.2 percent against the yen to 99.45
yen <JPY=>, but the euro was up 0.3 percent at $1.3320 <EUR=>.
Government bonds lost more ground as investors feared
missing out on the equity rally and shifted funds away from
safe-haven holdings.
In Korea, government bond futures <KTBc1> shed 0.31 point
to 111.25, pulling back from a six-week high hit last week on
hopes that the country may soon be included in the Citigroup
World Government Bond Index, attracting money from funds
following the benchmark.
Last week South Korean lawmakers approved a plan that would
give tax advantages to foreign investors in local currency
bonds, a step that could pave the wave for it to be included in
the Citigroup index tracked by investors managing some $1
trillion in debt. []
Benchmark five-year Korean bond yields <KR5YT=KSDA> were up
10 basis points at 4.27 percent.
(Editing by Tomasz Janowski)
