Asian Stocks Scale Three-Year Peak on China Optimism

Asian shares hit fresh three-year highs, with Hong Kong's Hang Seng share average striking a three-and-a-half-year high, on expectations that growth in China, the world's second largest economy, had stabilised.

However Asian indices failed to log major gains as market players exercised caution, ahead of the US Federal Reserve's monetary policy decision, and key US data expected later in the week.

Hong Kong's Hang Seng was trading 0.81%, or 198.69 points, higher to 24,627.32

The Shanghai Composite finished 0.24%, or 5.24 points, higher at 2,183.19.

The Japanese Nikkei finished 0.57%, or 88.67 points, higher at 15,618.07.

Australia's S&P/ASX finished 0.20%, or 11.00 points, higher at 5,588.40.

South Korea's Kospi finished 0.64%, or 13.16 points, higher at 2,061.97.

Markets in Malaysia, Indonesia and India were closed for Eid celebrations.

The US Fed, the world's most powerful central bank, is widely expected to cut its monthly asset buys by another $10bn as it looks to wrap up the scheme later in 2014.

Investors will also track the Fed decision for clues as to the timing of the first interest rate hike in the world's leading economy – higher US interest rates could trigger a capital outflow in Asia.

Standard Chartered said in a note to clients: "The proximity of the congressional testimony and the absence of a press conference after the FOMC meeting are further reasons to expect little news from this week's meeting. Overall, we are more cautious than consensus on US growth prospects.

"We expect 2.4% next year, versus the 3.0% consensus. Still, we think the Fed may hike the policy rate in June 2015. But we see the rate-hiking cycle remaining very gradual (100bps per year) and expect a tightening-cycle high of 3.0%."

Company Stock Movements

In Hong Kong, the charge was led by Chinese banks after a Reuters report said the country's fifth-biggest bank by assets, Bank of Communications, planned to sell a stake to private investors.

Bank of Communications shot up 6.2%, China Minsheng Banking jumped 3.6% and Agricultural Bank of China (ABC) gained 3%.

Hong Kong Exchanges & Clearing, the city's only exchange operator, jumped 3.5%.

Chinese internet major Tencent Holdings jumped 3.2% on news that China's top banking regulator had approved the creation of three private banks, including WeBank, in which Tencent has a 30% stake.

In Tokyo, automaker Nissan Motor added 2%, a day after reporting a 37% annual profit increase for the April-June quarter.

US Markets

Most US indices finished marginally higher on 28 July, ahead of the Fed's two-day policy meeting.

The Dow finished 22.02 points, or 0.1%, higher at 16,982.59.

The S&P 500 ended half a point, or 0.03%, higher at 1,978.91.

The Nasdaq closed 4.65 points, or 0.1%, lower to 4,444.91.