Asian Stocks Advance on U.S., China Stimulus Speculation
Asian stocks advanced, with the region’s benchmark index set for its highest close since May, on speculation central banks in the U.S. and China will ease monetary policy amid signs growth is slowing.
Jiangxi Copper Co. (358), the mainland’s biggest producer of the metal, climbed 3.6 percent in Hong Kong after the People’s Bank of China left the door open to more interest-rate cuts. Sinopharm Group Co. jumped 6.2 percent after first-half profit rose 22 percent at the nation’s No. 1 pharmaceuticals distributor. QR National Ltd. added 2.3 percent after Australia’s largest coal-train operator beat profit estimates.
The MSCI Asia Pacific Index (MXAP) gained 0.9 percent to 121.73 as of 5:29 p.m. in Tokyo, with almost two shares rising for each that fell. The gauge, which is headed for its highest close since May 4, extended its advance after U.S. Federal Reserve Bank of Chicago President Charles Evans urged more accommodative policy by central banks around the world.
“Some form of quantitative easing is coming soonish,” said Matthew Sherwood, Sydney-based head of markets research at Perpetual Investments, which manages about $25 billion. “U.S. policy makers are frustrated with the anemic pace of the recovery and this increased the odds that some form of additional Fed easing will be implemented at the central bank’s September meeting.”
The MSCI Asia Pacific Index has risen more than 11 percent from a June low on bets monetary authorities in the U.S., Europe and China would take action to boost slowing growth. Stocks on Asia’s benchmark index were valued at 12.6 times estimated earnings on average, compared with 13.7 for the S&P 500 and 11.7 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Hong Kong’s Hang Seng Index (HSI) rose 1.2 percent. PBOC Governor Zhou Xiaochuan yesterday said adjustments to interest rates and banks’ reserve requirements are still possible even after the central bank stepped up temporary cash injections this month. Japan’s Nikkei 225 Stock Average (NKY) gained 0.5 percent. Australia’s S&P/ASX 200 Index added 0.2 percent and South Korea’s Kospi Index both increased 0.4 percent.
The Shanghai Composite Index advanced 0.3 percent, having swung between gains and losses at least seven times, after a report showed China’s manufacturing may contract at a faster pace in August, signaling more stimulus is needed by the world’s second-largest economy.
The preliminary reading for a purchasing managers’ index for China released today by HSBC Holdings Plc and Markit Economics was 47.8 after July’s final 49.3 figure. If confirmed, it would be the weakest level since November. It would also mark the 10th month the gauge was below the 50 threshold that signals contraction, the longest run of such readings in the index’s eight-year history.
“It’s probably one of these occasions when bad news is good news,” said Garry Evans, Hong Kong-based head of global equity strategy at HSBC, Europe’s biggest lender. “Slightly weak China data maybe says we are going to get more policy response.”
Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The gauge rose less than 0.1 percent yesterday, reversing a 0.5 percent drop after minutes of the Federal Reserve’s most recent meeting showed many policy makers favored further stimulus measures unless the economy shows signs of sustainable recovery.
Fed policy makers said after the July 31-Aug. 1 meeting that they will step up record stimulus if needed to spur growth and cut a jobless rate stuck above 8 percent since February 2009. Chairman Ben S. Bernanke will have an opportunity to clarify his views in an Aug. 31 speech at a forum for central bankers in Jackson Hole, Wyoming, where he signaled a second round of bond buying by the Fed in 2010. Fed officials next meet on Sept. 12-13.
Raw material producers and information-technology companies advanced the most among the 10 industry groups in the MSCI Asia Pacific Index. Jiangxi Copper climbed 3.2 percent to HK$18.80 in Hong Kong. Glencore International Plc (805), the world’s largest publicly traded commodities supplier, rose 2 percent to HK$43.85.
China Telecom Corp. (728) surged 6.7 percent to HK$4.45, extending gains for a second day, after the country’s biggest fixed-line carrier yesterday posted second-quarter profit that beat analyst estimates. JPMorgan Chase & Co. today raised its rating to overweight from neutral, citing rising mobile users.
Of the 458 companies in the Asia-Pacific index that have reported quarterly earnings since July 1, and for which Bloomberg has estimates, more than half failed to meet projections, according to data compiled by Bloomberg.
Sinopharm jumped 6.2 percent to HK$24.80 after saying first-half profit increased 22 percent from a year earlier to 959.1 million yuan ($151 million) as broader health insurance coverage and higher subsidies spurred demand for medicines in China.
Henderson Land Development Co. advanced 4.7 percent to HK$49.05 after the Hong Kong builder controlled by billionaire Lee Shau-kee reported underlying profit of HK$3.59 billion ($463 million) for the first half, topping the median estimate of HK$2.7 billion of three analysts surveyed by Bloomberg.
Wharf Holdings Ltd. rose 4.7 percent to HK$48.90. The Hong Kong developer expanding in at least 14 Chinese cities said first-half profit excluding exceptional items rose 49 percent from a year earlier to HK$5.43 billion on sales from a Shanghai project and climbing rental income.
QR National (QRN) rose 2.3 percent to A$3.55 in Sydney after posting full-year net income of A$440.9 million ($464 million), exceeding the A$372.5 million average estimate by eight analysts compiled by Bloomberg.
Among stocks that fell, Fairfax Media Ltd. slumped 9.7 percent to 51 Australian cents, the most on the MSCI Asia Pacific Index. The publisher of the Australian Financial Review posted a record annual loss after writing down the value of newspaper titles by A$2.8 billion.
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