HONG KONG - ASIAN shares and the dollar rose on Thursday after investors welcomed benign US inflation data as a sign the Federal Reserve will have more wiggle room to deal with the downturn in the world's biggest economy.

Improving earnings prospects also comforted markets.

Japan's Sony surged 9 per cent a day after it issued a surprisingly upbeat operating profit forecast despite the challenges posed by a slowing US economy and a stronger yen.

'There is certainly positive momentum in the market,' said Ms Lucinda Chan, division director at Macquarie Equities in Sydney.

'I think that despite all the uncertainty, these are often very good times for investments and people are beginning to sense that mood now,' she said.

A rally in Asian stocks last month fizzled when May started with it a surge in oil prices to record highs that reinforced fears the world economy could face a crippling combination of high inflation and meagre growth.

The MSCI index for Asian stocks outside Japan rose 0.5 per cent as of 10.15am Singapore time, up some 18 per cent since the mid-March lows but down about 7 per cent for the year.

The gains matched Walls Street's advance after data on Wednesday showed US consumer prices rose a 0.2 perncent in April, less than expected.

That is expected to give the inflation-wary Federal Reserve more latitude to keep US interest rates low at 2 per cent as it seeks to support the national economy and calm financial markets.

KUALA LUMPUR
The Kuala Lumpur Composite Index (KLCI) rose 5.81 points, or 0.45 per cent, at 1,293.55 at midday.

HONG KONG

At 12.48pm Singapore time, the benchmark Hang Seng Index was down 0.52 per cent at 25,401.33 points. The China Enterprises Index of Hong Kong-listed mainland companies, or H shares, had risen 0.1 per cent to 13,994.86.

SHANGHAI
China's key stock index rose 0.54 per cent on Thursday, with many Sichuan-area shares outperforming due in part to expectations of demand from rescue and reconstruction efforts after a devastating earthquake in the region.

The benchmark Shanghai Composite Index ended the morning at 3,677.077 points, extending the previous day's 2.73 per cent gain as fears ebbed over the quake's potential economic impact.

Disaster modelling firm AIR Worldwide said the cost of the quake was likely to exceed US$20 billion (S$28 billion).

Deputy central bank governor Su Ning said on Thursday that the quake had created greater uncertainty for the Chinese economy and complicated the task of implementing macroeconomic controls, but added that the impact of the disaster would be limited and short-lived.

Gaining stocks in Shanghai outnumbered losers by 558 to 310, and more than 20 Shanghai and Shenzhen A shares rose by their 10 per cent daily limit.

TOKYO
Japan's Nikkei share average rose to a fresh four-month high on Thursday, up 1 per cent, with Sony jumping 9 per cent on its bigger-than-expected outlook.

Exporters such as Honda Motor Co also climbed on a softer yen against the dollar.

The benchmark Nikkei average ended the morning up 144.86 points at 14,263.41. The broader Topix index gained 1.6 per cent to 1,394.26. -- REUTERS, AFP