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Asian stock markets advanced Thursday after Spain’s deficit reduction plan eased worries about Europe’s debt mountain and good economic news sent U.S. stocks sharply higher.

Japan’s benchmark Nikkei 225 stock average rose 1.6 percent to 10,556.78. Solid corporate earnings results also boosted sentiment in Tokyo.

South Korea’s Kospi gained 1.4 percent to 1,686.28 and Hong Kong’s Hang Seng added 0.4 percent to 20,289.18. Australia’s S&P/ASX 200 index was up 1.2 percent at 4,625.40 and benchmarks in mainland China, Singapore and Taiwan also climbed.

The Asian rally followed a big day on Wall Street, where the Dow Jones industrial average climbed 148.65 points, or 1.4 percent, to 10,896.91 _ the highest level since May 4.

Spain announced a plan Wednesday to cut its big deficit, and analysts say the market’s rebound from last week’s drop reflects growing confidence that Europe’s debt problems are contained for now. Economic reports from the U.S. and Europe also helped reassure markets that the global recovery is intact.

Investors moved into tech stocks ahead of earnings from network gear maker Cisco Systems Inc. and following upbeat forecasts from Intel Corp. and IBM Corp.

The tech buying extended to Asia, boosting shares of South Korean chip makers. Samsung Electronics Co. jumped 2.4 percent, while Hynix Semiconductor Inc. surged 3.5 percent. Advantest Corp., a Japanese maker of memory chip testers, shot up 3.2 percent.

Sony Corp. added nearly 3 percent ahead of its annual earnings release later Thursday. The Japanese electronics and entertainment company is expected to book a far smaller net loss for last fiscal year through March 31.

The Standard & Poor’s 500 index rose 1.4 percent to 1,171.67 on Wednesday while the Nasdaq rose 2.1 percent to 2,425.02.

Benchmark crude for June delivery was down 7 cents at $75.58 in electronic trading on the New York Mercantile Exchange, extending the previous day’s big drop after the International Energy Agency said global oil demand is expected to rise less than previously expected in 2010.

In currencies, the dollar fell to 93.16 yen from 93.21 yen. The euro edged up to $1.2650 from $1.2628 late Wednesday.

Program Trading

One subject that has received widespread publicity in recent years is program trading. Perhaps, never in the history of financial markets has there been more criticism about a trading approach that was less understood. I would venture a guess that less than one out of ten people opposed to program trading even know the definition of the term. One source of confusion is that program trading is used interchangeably to describe both the original activity and as a more general term encompassing various computer-supported trading strategies. (for example, portfolio insurance).

Program trading represents a classic abitrage activity in which one market is bought against an equal short sale in a closely related market in order to realise small, near risk-free profits, resulting from short-lived distortions in the price relationship between such markets.

Program traders buy or sell an actual basket of stocks against an equal dollar value position in stock index futures when they perceive the actual stocks to be underpriced or overpriced relative to futures. In effect, program trading tends to keep actual stock and stock index futures prices in line.

Insofar as every program-related sale of actual stocks is offset by a purchase at another time and most program trades are first initiated as long stock/short futures positions, arguments that program trading is responsible for stock market declines are highly tenuous.

Moreover, since the bulk of economic evidence indicates that arbitrage between related markets tends to reduce volatility, the relationship between increased volatility and program trading is questionable at best.

Portfolio Insurance

Portfolio insurance refers to the systematic sale of stock index futures as the value of a a stock portfolio declines in order to reduce risk exposure. Once reduced, the net long exposure is increased back towards a full position as the representation stock index price increases.

The theory underlying portfolio insurance presumes that market pries move smoothly. When prices witness an abrupt, huge move, the results of the strategy may differ substantially from the theory. This occurred on October 19, 1987, United States of America, when prices gapped beyond threshold portfolio insurance sell levels, triggering an avalanche of sell orders which were executed far below the theoretical levels.

Although portfolio insurance may have accelerated the decline on October 19, it could be reasonably be argued that the underlying forces would have resulted in a similar price decline over a greater span of days, in the absence of portfolio insurance. This is a question that can never be answered. (It is doubtful that program trading, as defined above, played much of a role in the crash of the week of October 19, since the severely delayed openings of individual stocks, tremendous confusion related to prevailing price levels, and exchange restrictions regarding the use of the automated order entry systems severely impeded this activity.)

ALLGREEN, mac maintain OUTPERFORM with target price $1.40($2.04)

ASCOTT RESIDENCE TRUST, mac maintain OUTPERFORM with target price $1.82
($2.08)
ASCOTT RESIDENCE TRUST, ubs maintain BUY with target price $1.40($1.68)

ASCENDAS REIT, mac maintain OUTPERFORM with target price $2.89($3.28)

ASCENDAS INDIA TRUST, ml maintain UNDERPERFORM with target price $0.85
ASCENDAS INDIA TRUST, ubs downgraded to SELL from Neutral with target

 
 price
$0.70(from $1.07)

CAPITACOMMERCIAL TRUST, mac maintain OUTPERFORM with target price $3.05
($3.55)
CAPITACOMMERCIAL TRUST, ubs maintain BUY with target price $2.86

CAPITALAND, mac maintain OUTPERFORM with target price $7.04

CAPITAMALL TRUST, mac maintain OUTPERFORM with target price
$3.75($4.55)

CDL HOSPITALITY TRUSTS, mac maintain OUTPERFORM with target price $2.10
($2.82)

CHATERED SEMICON, dbs downgrade to FULLY VALUED with target price $0.66
($0.86)
CHARTERED SEMICON, gs downgrade to SELL with target price $0.95($0.54)
CHARTERED SEMICON, mac downgrade to UNDERPERFORM with target price
$0.58
($0.98)
CHARTERED SEMICON, ml maintain NEUTRAL with target price $0.76($0.93)

CHINA ZAINO, uob initial coverage BUY with target price $0.725
CHINA ZAINO by wc

CITY DEV, mac downgrade to NEUTRAL with target price $12.12

FRASERS CENTREPOINT TRUST, ml maintain BUY with target price $1.40
FRASERS CENTREPOINT TRUST, ubs maintain BUY with target price $2.01

INDOFOOD AGRI, gs maintain BUY with target price $3.20($3.25)

JURONG TECH, mac maintain NEUTRAL with target price $0.28($0.35)

K-REIT ASIA, mac maintain NEUTRAL with target price $1.42($1.56)

KEPPEL LAND, mac maintain OUTPERFORM with target price $7.20($9.57)

MAPLETREE LOGISTICS TRUST, mac maintain OTPERFORM with target price
$0.95
($1.63)

MOBILE ONE, cimb maintain NEUTRAL with target price $2.15
MOBILE ONE, citi maintain BUY with target price $2.20
MOBILE ONE, csfb maintain OUTPERFORM with target price $2.48
MOBILE ONE,  dbs maintain HOLD with target price $2.20
MOBILE ONE, ocbc maintain BUY with target price $2.33
MOBILE ONE, ubs maintain BUY with target price $2.34($2.50)

SIA, ubs maintain BUY with target price $19
SIA, citi maintain SELL with target price $13

SIA ENGINEERING, cimb maintain OUTPERFORM with target price
$4.18($4.83)
SIA ENGINEERING, uob downgrade to SELL with target price $3.22

SINGAPORE AIRPORT TERMINAL SERVICE, cimb downgrade to UNDERPERFORM with
target price $1.95($2.52)

SINGAPORE TELECOM, dbs maintain HOLD with target price $3.75

SOILBUILD, ocbc maintain BUY with target price $1.24
SOILBUILD, wc maintain BUY with target price $1.23

SP CHEMICAL, dbs upgraded to HOLD from Fully Valued with target price
$0.68(from $0.48)

SUNTEC REIT, mac downgrade to UNDERPERFORM with target price
$1.64($1.92)

BANK by ubs

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