Rating upgrade hints and Europe hopes lift Asian markets

Asian markets rallied overnight as Moody's mulled raising the ratings of some Asian countries, while investors pinned their hopes on an EU summit to solve the debt crisis.

Japan's Nikkei 225 jumped 1.71% to 8,722 and the Hong Kong Hang Seng  climbed 1.58% to 19,240 overnight.

France's Cac 40 and Germany's Dax also saw a strong gain after open this morning, rising 1.49% to 3,227 and 1.39% to 6,112 respectively. The FTSE 100 also gained 0.75% to 5,610.

A Moody's Investors Services announcement boosted sentiment as the ratings agency pointed to potential credit rating upgrades within Asia as some of its economies withstand the impacts of the eurozone debt crisis.

Five-year credit default swaps for China, South Korea, Indonesia, Malaysia, the Philippines and Thailand climbed an average 65 basis points to 163 this year, while contracts for 17 eurozone countries, excluding Greece jumped 122 to 305.

Moody's is examining swap trading, which protects against non-payment, to analyse how Asia copes with capital flows as it weighs rating changes.

Asia's 10 largest economies grew an average of 5.2% in the third quarter, triple the eurozone's 1.4% rate. In addition Asia's central banks hold $5.2trn in currency reserves, over half of the global total of $10.2trn.

But there was also bleaker news for China today as severe challenges to exports were predicted for 2012.

China's annual rate of export growth slowed in November versus October, vice commerce minister Chong Quan told reporters after a news conference on China's long-term trade development yesterday, Reuters reported.

China will report November trade data on Saturday, and economists are expecting the weakest growth in two years.

According to Chong, export growth in November was slower than October. Headline growth in exports in October of 15.9% was its most sluggish in eight months and also the slowest since November 2009 with the volatile February data stripped out.

The Chinese export sector is a vital driver of global economic growth is set to suffer further headwinds in the form of the European debt crisis and depressed US consumer spending.