Asia Stocks Rally to Two-Year High on Earnings Optimism

Asian stocks rose this week, with the regional benchmark index heading for the biggest monthly gain this year, as companies including BYD Co. (1211) and Kobe Steel Ltd. forecast profit increases.

BYD, the Chinese automaker partially owned by Warren Buffett’s Berkshire Hathaway Inc., jumped 16 percent in Hong Kong after saying first-half earnings will surge. Kobe Steel Ltd., Japan’s third-biggest steelmaker, rose 17 percent in Tokyo trading after it forecast its first profit in three years. Woodside Petroleum Ltd., Australia’s second-largest oil producer, added 13 percent after announcing plans to return cash to shareholders.

The MSCI Asia Pacific Index added 4 percent to 140.33 this week, touching its highest level since May 2011 on Thursday. The index is headed for a 4.6 percent gain in April, its largest monthly jump this year. The Topix Index added 3.1 percent in Tokyo as the Bank of Japan reiterated a pledge to double the country’s monetary base in two years.

“My feeling is that Asia may start looking healthier going forward, and profit results look OK,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has $126 billion under management. “Investors are giving Japan the benefit of the doubt. If it’s a good profit or economic figure, investors say it’s good. And if it’s a bad one, they say it doesn’t matter because the BOJ is doing stimulus.”

Policy Optimism

The MSCI Asia Pacific Index climbed 8.5 percent this year through April 26 amid optimism Japan will deploy more measures to beat deflation and that policy makers in the U.S. and China remain on standby to support growth. The Asian benchmark traded at 14.18 times estimated earnings, compared with 14.35 times for the S&P 500 and 12.84 times for the Stoxx Europe 600 Index.

Japan’s Nikkei 225 Stock Average (NKY) rose 4.3 percent, rising to its highest level since June 20, 2008. The BOJ on April 26 reiterated its commitment to double the country’s monetary base in two years, adding as much as 70 trillion yen ($710 billion) a year to the amount of money circulating in the economy.

Consumer prices, excluding the impact of a sales-tax increase and volatile fresh food costs, will rise 1.9 percent in the fiscal year starting in April 2015, according to the median estimate of BOJ board members published yesterday.

Australia Gains

Australia’s S&P/ASX 200 Index, which was closed for a public holiday on Thursday, rallied 3.4 percent this week, the most since Dec. 2, 2011. South Korea’s Kospi Index gained 2 percent. Hong Kong’s Hang Seng Index (HSI) added 2.4 percent. Taiwan’s Taiex Index advanced 1.2 percent.

China’s Shanghai Composite Index (SHCOMP) fell 3 percent on concern slowing growth will hurt earnings, dragging the benchmark index to a third straight monthly loss. Mainland markets will be closed through May 1.

Of the 883 companies on the Asia-Pacific gauge that have reported quarterly earnings this month, and for which Bloomberg has estimates, more than half have missed projections.

Every group on the gauge increased during the week, led by consumer discretionary companies and materials producers.

BYD gained 16 percent this week to HK$28.15, the biggest jump since November, after the maker of the E6 electric car said it may earn first-half net income of 400 million yuan ($65 million) to 500 million yuan, up from 16.3 million yuan a year earlier, according to a filing to Shenzhen’s stock exchange April 25. First-quarter profit soared 316 percent to 112.4 million yuan as sales increased 9.8 percent to 12.9 billion yuan.

Kobe Steel Surges

Kobe Steel surged 17 percent to 131 yen this week, its biggest weekly gain since Dec. 21, after it forecast a profit of 35 billion yen ($357 million) in the year started April 1, beating the 8 billion yen average estimate of 15 analysts compiled by Bloomberg news. Cost cuts, combined with demand for automotive steel in North America and China will help support earnings growth, according to a statement filed yesterday by the company.

Woodside Petroleum jumped 13 percent to A$38.45 this week, its highest level since July 22, 2011. The company announced it will return about $520 million to investors in dividends after dropping plans to build a liquefied natural gas project estimated to cost $45 billion.

Nippon Paper Industries Co. gained the most in the regional benchmark index this week, surging 21 percent to a record high of 1,478 yen this week after boosting its net income outlook for the year ended March 31 by 75 percent to 10.5 billion yen.

Among stocks that fell, Tokyo Electric Power Co. (9501), owner of the reactors at the center of the 2011 Japanese nuclear disaster, dropped 11 percent this week, the most in almost a year. TBS News reported it may post a pretax full year loss of 380 billion yen, citing an unnamed person on April 26. The company will report earnings April 30.

To contact the reporter on this story: Eleni Himaras in Hong Kong at ehimaras@bloomberg.net

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

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