* Profit-taking hits Asia shares after hefty Q2 gains
* MSCI Asia ex-Japan eyes biggest quarterly rise in 16
years
* Funds overweight stocks for 1st time since Dec '07
-survey
* JGB 10-yr yields fall further after spike
(Repeats to additional subscribers)
By Eric Burroughs
HONG KONG, June 18 (Reuters) - Asian stocks retreated on
Thursday, with some investors booking profits after solid gains
in the second quarter sparked by signs the global economy is
starting to recover.
European shares were set for a higher start, with futures
<STXEc1> pointing to very slight gains.
Asian stocks outside Japan are up nearly 30 percent so far
in the April-June quarter and poised for their biggest
quarterly gain in 16 years, led by a surge in Hong Kong's Hang
Seng <> and India's benchmark SENSEX index <>.
Analysts remain divided about whether consumer spending in
major economies will kick in later this year and help fuel the
pick up in growth.
But the renewed confidence among portfolio managers has
emboldened them to scoop up shares battered by the crisis last
year as hedge funds were forced to dump assets and the global
economy skidded into its deepest recession in decades.
A monthly poll from Bank of America-Merrill Lynch showed
global fund managers have moved to overweight stocks for the
first time since December 2007, during the early stages of the
crisis that began nearly two years ago.
The poll also found global growth expectations reaching
their highest level in six years. But a peaking out of Chinese
growth expectations suggested that outperformance of global
emerging markets versus developed markets has come to a
near-term end, the survey said. []
Japan's Nikkei average <> shed 1.4 percent and has
lost nearly 5 percent from an eight-month high struck last
week. But for the April-June quarter, the first of Japan's
business year, the Nikkei is still up 19 percent, which would
be its largest quarterly rise since 1995.
"It seems like a pull-back phase. People who want to take
profits are starting to appear," said Koichi Ogawa, chief
portfolio manager at Daiwa SB Investments in Tokyo.
The MSCI index of Asia-Pacific shares outside Japan
<.MIAPJ0000PUS> dropped 1 percent. Around the region, the
Taiwan Weighted index <> lost 0.8 percent and the Hang
Seng was down 2 percent.
Asian markets fared worse than the 0.1 percent dip in the
U.S. S&P 500 <.SPX> the previous day.
For the quarter, the MSCI index has jumped 29 percent,
which would be its biggest quarterly rise since the
October-December period in 1993.
"The global economy will continue to heal itself, albeit at
a gradual pace. The current sell-off in risky assets is
inconsistent with the gradually improving economic
fundamentals," said Stephen Jen, managing director of
macroeconomics and currencies at BlueGold Capital Management, a
London-based hedge fund.
DOLLAR STEADIES
The dollar was little changed and continued to suffer from
the rebound in riskier assets and commodity prices that has
prompted market players to favour higher-yielding currencies
tied to the global economy, such as the Australian dollar.
Doubts about the dollar's status as a reserve currency have
also hurt the greenback.
But leaders from the major emerging economies of Brazil,
Russia, India, China and South Africa refrained from mentioning
the dollar's reserve role in the communique of their inaugural
summit this week, even as Russia pushed the issue.
The dollar index <.DXY>, a gauge of its performance against
six major currencies, was little changed at 80.228, struggling
to recover from a seven-month low hit earlier in the month.
The euro edged up 0.2 percent to 1.3965 <EUR=>, while the
dollar gained slightly against the yen to 95.80 yen <JPY=>.
The dollar has also been hit by the sharp rebound in oil
and commodity prices as investors bet stronger growth will spur
demand for raw materials.
The U.S. currency's 90-day rolling correlations show that
the jump in gold and oil prices is having more of a negative
impact, but changes in short-term interest rates are exerting
little influence.
Oil prices rose 21 cents a barrel to $71.24 <CLc1>, buoyed
by a surprisingly big drop in U.S. crude inventories and
ongoing demand from China. Gold was little changed at $938.75
an ounce <XAU=>. [] []
Government bonds edged up on the dip in most stock markets,
extending a rebound from a sell-off sparked by the sharp slide
in U.S. Treasuries earlier in the month on further signs of
economic improvement and a flurry of mortgage portfolio hedging
against higher rates.
Korean bond futures <KTBc1> rose 27 ticks to 109.22,
recovering from a seven-month low after a vice finance minister
said the government and central bank agreed that there is no
need to raise interest rates.
Ten-year Japanese government bond yields <JP10YTN=JBTC>
dipped half a basis point to 1.455 percent and are down 10.5
basis points from an eight-month peak struck earlier in the
month on the slide in Treasuries and Nikkei rally.
(Additional reporting by Masayuki Kitano in Tokyo; Editing by
Kazunori Takada)
