Asian stocks rose, erasing earlier declines, after China released reports showing industrial output grew more than economists forecast and that inflation accelerated at the fastest pace in almost three years.
China Coal Energy Co., a Beijing-based coal producer, pared its advance to 1.8 percent as China raised the reserve ratio requirement for major banks. BHP Billiton Ltd. (BHP), the world’s No. 1 mining company, lost 0.2 percent, paring a decline of as much as 1.8 percent ahead of the Chinese data. Tokyo Electric Power Co., the owner of the stricken Fukushima Dai-Ichi nuclear power plant, jumped 25 percent in Tokyo, leading Japanese power companies higher after Japan’s Cabinet approved a bill to help the utility compensate victims of the worst nuclear disaster in 25 years.
The MSCI Asia Pacific Index gained 1.1 percent to 132.88 as of 8:45 p.m. in Tokyo, with all 10 industry groups rising.
“The market had been fearing an increased likelihood of a hard landing in China,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management. “Instead, the growth numbers are better than expected and it seems that inflation is coming in line with expectations.”
China’s inflation accelerated to 5.5 percent in May, with the annual gain in consumer prices matching the median estimate in a Bloomberg News survey of economists. The Beijing government has an annual target for the consumer price index of 4 percent. Production rose 13.3 percent last month, the statistics bureau said in Beijing today, compared with a 13.1 percent forecast.
The Asia-Pacific gauge earlier slipped as much as 0.2 percent after Standard & Poor’s cut Greece’s credit rating to the lowest debt grade, feeding doubts about the strength of the global economic recovery.
Japan’s Nikkei 225 (NKY) Stock Average gained 1.1 percent, also extending gains after the Bank of Japan maintained interest rates near zero and unveiled a 500 billion yen ($6 billion) loan program to help the country’s earthquake-hit economy recover.
South Korea’s Kospi Index advanced 1.4 percent. Australia’s S&P/ASX 200 Index, which was shut for a public holiday yesterday, rose 0.5 percent, having retreated as much as 1.1 percent earlier.
Hong Kong’s Hang Seng Index (HSI) erased gains, closing down 0.1 percent after China announced a further increase to the reserve ratio requirement for major banks to curb inflation. A half percentage point increase announced by the central bank today and effective June 20 will take it to a record 21.5 percent for the nation’s biggest lenders.
Bank of Communications Co., part-owned by HSBC Holdings Plc, closed down 0.7 percent at HK$7.42 in Hong Kong after rising as much as 0.8 percent.
“Markets initially reacted positively to the China inflation numbers because they didn’t surprise too much to the upside,” said AMP Capital’s Naeimi. “The market priced out any near-term hikes in interest rates, and now the sudden increase to the reserve ratio requirement has spooked people.”
Futures on the Standard & Poor’s 500 Index gained 0.7 percent today. In New York, the index rose 0.1 percent yesterday, rebounding from six weeks of losses, as a pickup in takeovers and the cheapest valuations in almost a year helped offset concerns about a slowdown in the economic recovery.
Transatlantic Holdings Inc. (TRH), the reinsurer formerly owned by American International Group Inc., agreed to merge with Switzerland’s Allied World Assurance Company Holdings AG. VF Corp., an apparel maker, also said it will buy Timberland Co. (TBL), a footwear maker, for $1.8 billion.
China Coal, BHP
U.S. stocks fell before rebounding and oil extended losses as S&P cut Greece’s credit rating by three levels to CCC.
China Coal rose 1.8 percent to HK$10.32 in Hong Kong. It earlier advanced 3.9 percent. Aluminum Corp. of China advanced as much as 2.6 percent, and closed 0.3 percent higher at HK$6.68.
BHP Billiton, also Australia’s biggest oil producer, fell 0.2 percent to A$43.05 in Sydney. Rio Tinto Group was little changed at A$80.21 and Korea Zinc Co lost 0.3 percent to 377,500 won in Seoul. All three companies pared earlier declines.
Crude oil for July delivery fell 2 percent to $97.30 a barrel in New York yesterday, while the London Metal Exchange Index of prices for six metals including copper and aluminum dropped for a second day.
“Concerns about the economic slowdown are emerging and investors are increasingly avoiding risk assets,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Investors are unwinding their positions in the commodity market.”
The MSCI Asia Pacific Index has fallen 4.5 percent this year through yesterday, compared with a gain of 1.1 percent by the S&P 500 and a drop of 2.6 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.4 times estimated earnings on average, compared with 12.8 times for the S&P 500 and 10.8 times for the Stoxx 600.
Tokyo Electric surged 25 percent to 249 yen in Tokyo. Tepco shares surged after the stock exchange clamped down on short- selling of the stock and the Cabinet approved a bill to help compensate victims of the disaster.
The Mainichi newspaper reported that the utility may raise electricity rates by 16 percent in the next fiscal year under a plan to deal with the aftermath of the Fukushima Dai-Ichi nuclear-plant disaster.
Japanese Trade Minister Banri Kaieda later said he thinks a 16 percent tariff increase is impossible, Kyodo News reported, citing comments made by the minister following a Cabinet meeting.
Chubu Electric Power Co. gained 13 percent to 1,307 yen after the Nikkei newspaper reported that it and Marubeni Corp. were close to winning an order for a gas-fired combined-cycle power plant in Oman with a Qatari utility.
In Seoul, Hankook Tire Co., South Korea’s largest tiremaker, jumped 9 percent to 42,500 won. Korea Investment & Securities Co. said in a report that an 8.2 percent slump in the shares yesterday, triggered by concern about a recall in China, was “overdone.”
To contact the reporters on this story: Shani Raja in Sydney at firstname.lastname@example.org.
To contact the editor responsible for this story: Nick Gentle at email@example.com.