Asian markets rebound, Shanghai leads gains

HONG KONG - Asian markets climbed Tuesday following a big sell-off in the previous session, with Shanghai leading the rebound as China's annual parliamentary gathering kicked off.

Traders also took heart from a rally on Wall Street that saw the Dow close within sight of a record high.

Tokyo added 0.27 per cent, or 31.16 points, to 11,683.45 and Seoul advanced 0.17 per cent, or 3.46 points, to 2,016.61, while Sydney jumped 1.29 per cent, or 64.9 points, to close at 5,075.4.

In the afternoon Shanghai, which dived 3.65 per cent Monday, bounced 2.26 per cent, while Hong Kong rose 0.45 per cent.

Shanghai clawed back some of the losses suffered Monday when property and construction stocks suffered a sell-off after the government set out rules aimed at capping house prices.

But eyes were on China's National People's Congress (NPC), which opened Tuesday with outgoing Premier Wen Jiabao saying the government would target growth of 7.5 per cent for the world's number two economy in 2013 and 3.5 per cent inflation.

"We should energetically change the growth model," Wen said in his final major act after a decade amid demands that China revamp its investment and export-led growth in favour of domestic spending.

A separate government document laid down a 10.7 per cent rise in defence spending to 720.2 billion yuan (S$143.6 billion) in 2013.

The NPC is meeting for nearly two weeks in Beijing and will seal a power transfer to Li Keqiang as Wen's successor, and Communist Party supremo Xi Jinping as state president.

Regional investors also cheered a positive lead from New York, where the Dow rose 0.27 per cent to 14,127.82, within 40 points of an all-time high seen in October 2007.

Remarks from the Federal Reserve's number two official reaffirming its aggressive stimulus policy provided support to US shares.

Janet Yellen, vice chairwoman of the Fed board of governors, said in a speech that the central bank intends to "keep monetary policy highly accommodative until well into the recovery."

The S&P 500 gained 0.46 per cent and the Nasdaq was up 0.39 per cent.

Traders also appeared to shrug off the lack of action in Washington on dealing with the "sequester" of US federal spending cuts that came into effect on Friday and which could shave around 0.5 percentage points off growth.

Analysts said the effect of the $85 billion in cuts would not be seen yet, giving politicians a little time to agree a less stringent budget that would help slash the country's deficit.

On currency markets the dollar bought 93.00 yen in afternoon trade against 93.46 yen in New York late Monday.

The euro fetched 121.20 yen and $1.3033 compared with 121.74 yen and $1.3024.

The yen saw slight gains despite promises of further monetary easing from the men tapped by the government to take the helm at the Bank of Japan.

Sydney shares showed little reaction to widely-expected news that the Reserve Bank of Australia had kept interest rates on hold at 3.0 per cent, saying the downside risks to the world economy appeared to have eased slightly.

Oil prices rebounded from big losses late Monday.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for delivery in April added 20 cents to $90.32 a barrel in the afternoon and Brent North Sea crude for April delivery increased 46 cents to $110.55.

Gold was at $1,581.10 at 0630 GMT compared with $1,577.65 late Monday.