Asian Stocks Rise on Valuations, Earnings Reports; Woolworths, Hynix Gain

Asian stocks rose, lifting the MSCI Asia Pacific Index from a one-month low, amid speculation declines this month have made shares cheap relative to earnings.

Woolworths Ltd., Australia’s biggest retailer, surged 2.4 percent after forecasting increased earnings and saying it will buy back shares. Air New Zealand Ltd. gained 4.1 percent after reporting higher profit. Hynix Semiconductor Inc. climbed 2.5 percent in Seoul on speculation companies will buy stakes in the chipmaker. China Life Insurance Co. slumped 5.4 percent in Hong Kong as first-half earnings disappointed some investors.

The MSCI Asia Pacific Index gained 0.5 percent to 116.49 as of 4:17 p.m. in Tokyo. The index slumped 5.3 percent from a three-month high on Aug. 6 to settle yesterday at its lowest level since July 22. Companies in the gauge, which has lost 3.3 percent this year on concern economies in the U.S., Europe and China will falter, are valued at an average 13.5 times estimated profit, the cheapest since December 2008.

“If the current economic softness proves to be temporary then you could say markets are cheap, no question,” said Prasad Patkar, who helps manage $1.6 billion at Platypus Asset Management in Sydney. “Valuations have to be put in context of the economic outlook, and markets will fall further if the world is slipping back into a recession.”

Japan’s Nikkei 225 Stock Average rose 0.7 percent, the first gain in five days, as a weaker yen boosted exporters. China’s Shanghai Composite Index gained 0.3 percent, while Australia’s S&P/ASX 200 Index climbed 0.8 percent. New Zealand’s NZX 50 Index increased 0.4 percent.

U.S. Reports

Futures on the Standard & Poor’s 500 Index increased 0.1 percent. The gauge rose 0.3 percent yesterday after slumping as much as 1.1 percent, amid speculation declines in equities had overshot the potential damage from a slowdown in the economy.

Sales of U.S. new homes slumped 12 percent in July to the weakest pace since data began in 1963, government data yesterday showed. A separate report showed orders for durable goods in the U.S. increased 0.3 percent, compared with the 3 percent median estimate of economists in a Bloomberg survey.

Woolworths increased 2.4 percent to A$27.54 in Sydney after the retailer said it will buy back A$700 million ($619 million) of shares, more than double the amount the company purchased earlier this year. Net income in the year ending June 2011 will rise between 8 percent and 11 percent from the A$2.02 billion reported today, Woolworths said. Wesfarmers Ltd., Australia’s second-largest retailer, rose 2.8 percent to A$31.09.

Profit Results

Fortescue Metals Group Ltd., Australia’s third-biggest producer of iron ore, advanced 3.7 percent to A$4.50 after full- year profit rose 14 percent as production gained.

Virgin Blue Holdings Ltd. surged 13 percent to 31.5 Australian cents after the airline swung to a full-year profit, and after agreeing to cooperate with Etihad Airways PJSC on flights to Europe. In Wellington, Air New Zealand gained 4.1 percent to NZ$1.26 after the nation’s biggest airline said full- year profit rose as it cut costs in response to waning demand from tourists and business travelers.

“We’re seeing a deceleration of growth, but it’s unlikely that we’re going to head straight back to a recession,” Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management (Asia) Ltd., told Bloomberg Television. “At the end of 2010, shares will be higher than what we’re seeing now.”

A gauge of technology stocks in the MSCI Asia Pacific Index rose 0.4 percent. Hynix Semiconductor, the world’s second- largest maker of memory chips, gained 2.5 percent to 22,600 won in Seoul.

“There were market rumors about potential interest by a couple of South Korean industrial groups,” said Kim Young-Chan, an analyst at Shinhan Investment Corp., declining to name the companies.

Weaker Yen

Chipmakers also rose after the DXI Index, a broad-based measure of memory-chip prices, advanced for the first time in 10 days. In Tokyo, Elpida Memory Inc. gained 1.6 percent to 1,046 yen.

Japanese exporters gained as the yen weakened on speculation policy makers will take steps to curb its advance. The yen dropped to 107.79 per euro from 107.05 yesterday in New York, after climbing to 105.44 on Aug. 24, the strongest level since July 2001. Japan’s currency fell to 84.68 per dollar from 84.58. It rose to 83.60 on Aug. 24, the most since June 1995.

Fanuc Ltd., a robot manufacturer that gets about 80 percent of its revenue outside Japan, jumped 1.3 percent to 9,210 yen. Canon Inc., the world’s biggest maker of cameras, advanced 1.3 percent to 3,470 yen. Nintendo Co., the No. 1 maker of video- game machines worldwide, increased 0.5 percent to 23,470 yen.

U.S. Economy

All of the 10 industry groups represented on the MSCI Asia Pacific Index rose today, led by consumer-staple stocks. The gauge slumped 1.6 percent yesterday, the most in two weeks, as a record plunge in U.S. home sales and slowing Japanese export growth added to evidence a global economic recovery is weakening.

A government report tomorrow is forecast to show the U.S. economy expanded at a 1.4 percent pace in the second quarter, compared with an earlier estimate of 2.4 percent, according to a Bloomberg survey before the Commerce Department report.

“Worries about the economic recovery still persist,” said Masaru Hamasaki, chief strategist in Tokyo at Toyota Asset Management Co., which oversees about $15 billion. “Stocks declined so sharply recently, so they could rebound. People still don’t know whether the outlook on the economy is too pessimistic.”

China Life, the nation’s biggest insurer, slumped 5.4 percent to HK$30.95 in Hong Kong after reporting a 7.4 percent increase in first-half profit. The company’s Shanghai-listed shares lost 3.8 percent to 22.38 yuan.

Earnings were “weak,” according to a Citigroup Inc. report dated yesterday. China Life is the broker’s “least- preferred play” in the industry because of its “lackluster” operating trends and lack of property and casualty exposure, the report said.

To contact the reporters for this story: Shani Raja in Sydney at sraja4@bloomberg.net.

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