Asian Stocks Climb as China Shares Erase 2012 Drop

Asian stocks advanced, with the Shanghai Composite Index erasing this year’s loss on speculation new leaders will do more to spur growth and reform the financial system. Japanese stocks jumped.

The Shanghai measure surged 2.5 percent as Industrial & Commercial Bank of China Ltd., the world’s most profitable lender, climbed 3 percent. Honda Motor Co. (7267), a carmaker that gets 81 percent of its sales outside Japan, rose 1 percent after Japan’s currency touched a-20-month low against the dollar. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender, added 1.8 percent as incoming Japanese Prime Minister Shinzo Abe pressured the central bank to raise its inflation target.

The MSCI Asia Pacific Index gained 0.4 percent to 128.46, heading for its first advance in four days, at 6:15 p.m. in Tokyo. More than two stocks advanced for each that fell. Equity markets are closed today in New Zealand, Australia, South Korea, Singapore, India and Hong Kong for the holidays.

“There are growing expectations that new leaders will take measures to reform the economy and the financial system will find new growth drivers,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co., which manages $120 million. “That’s why you see all these big-caps rallying today. The ongoing economic recovery is spurring the rebound as well.”

Shanghai Rally

Just 11 of the 994 members on the Shanghai Composite fell. Financial and energy companies were the biggest contributors to the gauge’s advance. The benchmark index for mainland China’s biggest equity market rose 12 percent this month amid signs the world’s No. 2 economy is accelerating and as a newly installed leadership emphasized urban development.

Industrial & Commercial Bank of China gained 3 percent to 4.14 yuan. Agricultural Bank of China Ltd. advanced 2.6 percent to 2.80 yuan. PetroChina Co., the nation’s biggest oil and natural gas producer, rose 1.9 percent to 8.97 yuan.

The MSCI Asia Pacific Index has gained 13 percent this year as U.S. and Chinese economies showed signs of recovery and central banks around the world took action to shore up growth. The Asian benchmark trades at 14.6 times estimated earnings on average, compared with 13.8 times for the Standard & Poor’s 500 Index and 12.7 times for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) increased 1.4 percent and the broader Topix Index rose 0.6 percent. Taiwan’s Taiex Index (TWSE) added 1.3 percent, led by light-emitting diode makers Lextar Electronics Corp. and Bright LED Electronics Corp. which each soared more than 6.9 percent.

Abe, speaking Dec. 23 on Japan’s Fuji Television, said he will consider revising the law governing the nation’s central bank if it fails to set an inflation target of 2 percent at its January meeting. The yen touched 84.96 per dollar today, the lowest since April 2011. A weaker yen boosts the value of overseas earnings for Japan’s exporters.

BOJ Pressure

“Stocks are holding up on optimism for a weaker yen and more monetary easing after Abe said he’ll consider revising the law governing the Bank of Japan unless they adopt a higher inflation target,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees about $6.3 billion. “Financial shares are rising on monetary easing and reflation optimism. For instance banks are rising on optimism monetary easing will boost borrowing.”

Japanese exporters advanced, with Honda adding 1 percent to 3,030 yen. Canon Inc. (7751), the world’s biggest camera maker, rose 2.1 percent to 3,375 yen.

Japanese banks and realtors gained on optimism the government’s efforts to end deflation will boost loan demand. Mitsubishi UFJ added 1.8 percent to 446 yen and Sumitomo Mitsui Financial Group Inc. (8316), the country’s second-biggest lender by market value, rose 0.8 percent to 3,060 yen.

Mitsubishi Estate Co., Japan’s biggest realtor by market value, advanced 1.9 percent to 1,933 yen and Mitsui Fudosan Co. added 2.6 percent to 2,046 yen.

The S&P 500 (SPXL1) dropped 0.2 percent in New York yesterday amid concern policy makers will fail to strike a budget compromise by year end to avoid more than $600 billion in spending cuts and tax increases, the so-called fiscal cliff. Lawmakers plan to return to Washington on Dec. 27 to resume negotiations.

To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@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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