Asian Stocks Post Longest Rally Since 2009 on Stimulus

Asia’s benchmark stock index is posting its longest streak of gains in more than three years amid signs China’s economy has stopped deteriorating and that three rounds of economic stimulus may be reviving U.S. demand.

The MSCI Asia Pacific Index rose 0.3 percent yesterday, extending gains to an 11th day, the longest run since July 2009. Exporters from Samsung Electronics Co. to Toyota Motor Corp. led the advance on speculation improvement in the U.S. housing and labor markets will spur more sales. Mining companies increased as Chinese industrial production accelerated.

“We are increasing investments in Asia,” Grace Tam, Hong Kong-based global market strategist at JPMorgan Asset Management Ltd., which oversees about $1.3 trillion globally, said in a telephone interview yesterday. “When we began to see improvements in China, we thought right now was a really good time to buy Asian equities. This is just the start of a rebound, and valuations are still pretty cheap.”

A 6.6 percent rally in the MSCI Asia Pacific Index since mid-November has added almost $580 billion to the value of the measure. The gauge rose 12 percent this year through yesterday as central banks took steps to support economic growth. The flow of funds to the region, and the anticipation of even more stimulus in the U.S., Japan and China, has sent gauges of large and small companies surging.

Hong Kong’s Hang Seng Index has gained 12 percent since the U.S. Federal Reserve began a third round of so-called quantitative easing in September. Measures of Chinese shares have jumped as industrial output and retail sales added to signs the world’s second-largest economy is improving.

Election Rally

Japan’s Nikkei 225 Stock Average is up 8 percent since Nov. 16 on speculation an election this weekend will result in a change of government and more policies to boost growth and weaken the yen.

Shares on the MSCI Asia-Pacific gauge traded at 14.4 times analyst earnings estimates yesterday, compared with 13.8 times for the Standard & Poor’s 500 Index and 12.7 times for the Stoxx Europe 600 Index.

China’s Shanghai Composite Index (SHCOMP), which trades for 10 times estimated profits, rebounded from a four-year low this month. The nation’s gross domestic product may expand 7.7 percent in the fourth quarter from a year earlier, according to the median estimate in a Bloomberg survey. Growth was 7.4 percent in the three months through September, the least in three years. The government’s 2012 target is for 7.5 percent growth.

Very Cheap

“China particularly in Asia looks very cheap,” said Bill Maldonado, chief investment officer for Asia Pacific at HSBC Global Asset Management, which oversees $417 billion. “Definitely the tone of what you hear about China, about the U.S., about the investment picture in general is a lot less bearish than it was three months ago or six months ago.”

The U.S. economy is showing signs of recovery following three rounds of quantitative easing, with the jobless rate falling to a three-year low and the housing market recovering. The Federal Reserve announced on Dec. 12 it will expand its asset purchase program by buying $45 billion a month of Treasury securities starting January.

“Tail risks with the global economy had receded,” said Shane Oliver, Sydney-based head of strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “A year ago, there was an intense concern that Europe will blow apart. That hasn’t happened and the European recession is not the disaster that had been feared. The U.S. economy sort of muddles along with the Fed pumping more and more money in. China’s economy looks to be stabilizing.”

Asian Titans

The Dow Jones Asian Titans Index (DJAT), which tracks the region’s 50 biggest companies, rose 4 percent in the 11 days through yesterday, the longest streak of advances since May 1997, according to data compiled by Bloomberg News.

Among companies in the Titans Index, Samsung Electronics, the world’s biggest smartphone maker, posted the biggest advance this year, closing at a record yesterday. The first South Korean company to exceed $200 billion in market capitalization, it is now the world’s 15th-largest listed firm.

“Samsung is doing well both in the high-end and lower-end sectors,” Lee Sun-Tae, an analyst at NH Investment & Securities Co. in Seoul, said. “The main reason behind this seems to be the company’s brighter fourth-quarter earnings outlook, largely helped by its handset business.”

Weaker Yen

Japan’s Nikkei 225 Stock Average jumped 1.7 percent yesterday to its highest close since April as exporters rallied after the yen dropped to an almost nine-month low.

The world’s No. 2 equity market has rallied as polls suggested opposition leader Shinzo Abe, who has called for more aggressive monetary easing, will win. A weaker currency boosts the value of overseas income at the nation’s car makers and electronics manufacturers.

Canon Inc., the world’s biggest camera maker, rose 2.1 percent to 3,140 yen in Tokyo yesterday. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, advanced 6.4 percent to 886 yen. Panasonic Corp., which makes home appliances and solar panels, jumped 7.9 percent to 481 yen. Toyota Motor Corp., the world’s largest carmaker, gained 1.1 percent to 3,600 yen.

“People are now pretty excited with the Japanese election coming up this weekend,” JPMorgan Asset Management’s Tam said. “Investors have a high expectation that if Abe wins the elections, they’ll do more aggressive monetary easing and people expect the yen to weaken.”

Small Caps

It’s not just big companies enjoying gains. Singapore’s FTSE Straits Times Small Cap Index (FSTS) climbed for 20 days through yesterday, a record, and is at the highest level since August 2011. A similar gauge in India capped its longest winning streak on Dec. 10. The MSCI Asia Pacific excluding Japan Small Cap Index is trading at the highest since March.

A strong rally in small companies may herald the start of a broad-based bull market, said AMP Capital’s Oliver.

“When you go into a bull market investors tend to take on more risks and they buy more small caps,” Oliver said. “The small cap rally is a good sign because that’s a confirmation that what we might be seeing is the beginning of a bull market.”

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net

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