Asia Stocks Hit One-Month High on Bank Stress Test Results
Asian Stocks Rise to One-Month High
Tomohiro Ohsumi/Bloomberg
Japan’s Nikkei 225 Stock Average climbed 1.2 percent, while Australia’s S&P/ASX 200 Index gained 0.9 percent.
Japan’s Nikkei 225 Stock Average climbed 1.2 percent, while Australia’s S&P/ASX 200 Index gained 0.9 percent. Photographer: Tomohiro Ohsumi/Bloomberg
July 26 (Bloomberg) -- Steve Bernstein, chief executive officer of Oppenheimer Investments Asia Ltd., talks with Bloomberg's Haslinda Amin about his investment strategy for Asian stocks. Bernstein, speaking in Hong Kong, also discusses the outlook for Chinese banks and initial public offerings. (Excerpt. Source: Bloomberg)
Asian stocks rose, driving the MSCI Asia Pacific Index to a one-month high, after most European banks passed stress tests, boosting optimism over the health of the global economy.
Standard Chartered Plc, a London-based bank, advanced 1.2 percent in Hong Kong. Canon Inc., which counts Europe as its biggest market, climbed 2.5 percent in Tokyo trading. LG Electronics Inc. jumped 4.2 percent in Seoul after the stock was upgraded at JPMorgan Chase & Co. Inpex Corp., Japan’s largest energy explorer, surged 4.9 percent after Deutsche Bank AG reiterated its “buy” call on the stock.
The MSCI Asia Pacific Index gained 0.5 percent to 118.01 as of 7:26 p.m. in Tokyo, set for its highest close since June 22. The gauge has slumped 8.6 percent from this year’s high on April 15 as Europe’s debt crisis and China’s steps to curb property prices fueled concern that global economic growth will slow.
“The stress test results weren’t the disaster that some thought it would be,” said Tim Schroeders, who helps manage about $1.1 billion at Pengana Capital Ltd. in Melbourne. “As time goes on, the likelihood of a double dip recession seems to be diminishing, but economic growth is going to be tempered.”
Japan’s Nikkei 225 Stock Average climbed 0.8 percent, while Australia’s S&P/ASX 200 Index gained 0.6 percent. New Zealand’s NZX 50 Index rose 0.9 percent.
Hong Kong’s Hang Seng Index added 0.1 percent as rising home prices boosted property developers. China’s Shanghai Composite Index gained 0.7 percent as brokerages including Citic Securities Co. predicted further gains for equities.
South Korean Growth
The Kospi index increased 0.6 percent in Seoul, where the central bank reported a 1.5 percent expansion in the country’s second-quarter gross domestic product from the previous quarter. That was more than the 1.3 percent median forecast in a Bloomberg News economist survey.
Futures on the U.S. Standard & Poor’s 500 lost 0.1 percent. The gauge advanced 0.8 percent on July 23 on speculation acquisitions are accelerating and General Electric Co. boosted its dividend.
Standard Chartered, which earns most of its profit in Asia, advanced 1.2 percent to HK$218. HSBC Holdings Plc, Europe’s biggest bank by market value, climbed 0.9 percent to HK$77.55. Westpac Banking Corp. increased 1.9 percent to A$23.15 in Sydney.
Stress Test Results
European regulators found that seven banks need to raise a combined 3.5 billion euros ($4.5 billion) of capital. Germany’s Hypo Real Estate Holding AG, Agricultural Bank of Greece SA and five Spanish savings banks didn’t have adequate reserves to maintain a Tier 1 capital ratio of at least 6 percent in the event of a recession and sovereign-debt crisis, lenders and regulators said on July 23.
Before the results were published, analysts at Goldman Sachs Group Inc. estimated that lenders would need to raise 38 billion euros and Barclays Capital said they would require as much as 85 billion euros.
The stress tests “might not be vigorous enough as the tests are performed after recapitalization for the banks, but it is a piece of slightly positive news for the investing public,” said Pu Yonghao, Hong Kong-based chief investment strategist for the Asia Pacific region at UBS Wealth Management, which oversees $190 billion. “The stress tests results remove market uncertainties in Asia.”
Canon, the world’s largest maker of cameras, soared 2.5 percent to 3,530 yen. Fanuc Ltd., a maker of industrial robots that earns about 80 percent of its revenue overseas, climbed 1.7 percent to 10,490 yen. Hitachi Ltd., which derives 40 percent of its revenue abroad, advanced 1.2 percent to 344 yen.
Weaker Yen
Japanese exporters also advanced as the yen weakened to 113.22 per euro from 112.90 in New York last week. Japan’s currency dropped to 87.47 per dollar from 87.46. The weaker yen boosts the value of sales generated overseas in local terms for Japanese companies.
LG Electronics, South Korea’s second-largest electronics maker, advanced 4.2 percent to 103,500 won. The company was raised to “overweight” from “neutral” by JPMorgan analysts, who cited the stock’s valuation and a potential recovery in the company’s handset business from the fourth quarter.
Speculation that economic growth may disappoint dragged down the MSCI Asia Pacific Index by 2 percent this year, cutting the average price of stocks in the gauge to 14.2 times estimated earnings, near the lowest level since December 2008. That compares with 13.4 times for the S&P 500 Index and 11.9 times for the Stoxx Europe 600 Index.
Export Growth
Economic data from the U.S. this month have fueled concerns the world’s biggest economy is stalling. Sales at U.S. retailers declined in June for a second month, the Commerce Department reported on July 14. Home-builder confidence dropped this month to the lowest level since April 2009, National Association of Home Builders/Wells Fargo data on July 19 showed.
Today, the Finance Ministry of Japan said in Tokyo the country’s shipments abroad surged 27.7 percent in June from a year earlier, faster than economists estimated. South Korea’s central bank said separately that the country’s economy had grown 7.2 percent in the second quarter from a year earlier.
“As our economy has shown stronger-than-expected recovery, it may have already entered a phase of expansion,” Kim Myung Kee, an official at the Bank of Korea, told reporters today. “Robust exports are now spilling into domestic demand.”
Gauges of technology and raw-materials companies posted the biggest advances in the MSCI Asia Pacific Index today.
Materials, Energy
Inpex surged 4.9 percent to 430,000 yen. Tomohiro Jikihara, a Deutsche Bank analyst, reaffirmed a “buy” rating on the stock in a report dated yesterday, saying a $6.6 billion equity- financing plan is positive for the company.
BHP Billiton Ltd., the world’s biggest mining company, increased 0.4 percent to A$39.82 in Sydney after copper futures in New York advanced for a sixth day. Rio Tinto Group, the world’s third-largest mining company, gained 0.6 percent to A$70.25.
Jiangxi Copper Co., China’s biggest producer, gained 0.8 percent to HK$16.98 in Hong Kong after it was reiterated at “overweight” at Morgan Stanley, which said in a note to clients copper was “primed” for a rally.
Also in Hong Kong, Sun Hung Kai Properties Ltd., the city’s biggest developer by market value, gained 0.8 percent to HK$114.80 after saying sold 300 flats at an apartment project in the past two weekends, said Victor Lui, an executive director at Sun Hung Kai’s agency arm.
Hong Kong Real Estate
Hang Lung Properties Ltd., Hong Kong’s third-largest developer, advanced 1.2 percent to HK$33.45. Cheung Kong (Holdings) Ltd., the city’s second-biggest developer, climbed 1.2 percent to HK$94.10.
A gauge of property stocks in Hong Kong’s Hang Seng Index climbed 1 percent, the most of four industry groups. Hong Kong’s home prices rose 0.35 percent for the week ended July 18 to the highest level since 1997, Centaline Property Agency Ltd. reported July 23.
In Sydney, Wesfarmers Ltd., Australia’s second-largest retailer, jumped 3.2 percent to A$30.08 after saying sales at its Coles unit rose 5.5 percent in the fourth quarter.
Among shares that declined, QBE Insurance Group Ltd., Australia’s biggest insurer by market value, slumped 5.6 percent in Sydney to A$16.97 after its first-half insurance profit margin missed the company’s target range.
----With assistance from Ronnie Koo in Hong Kong, Shani Raja in Sydney and Toshiro Hasegawa in Tokyo. Editors: Darren Boey, Sam Waite.
To contact the reporters for this story: Monami Yui in Tokyo at myui1@bloomberg.net; Lisa Pham in Sydney at lpham14@bloomberg.net.
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