Asian Stocks Cap Second Week of Gains on Japan Optimism

Asian stocks rose for a second week, with Japanese shares leading gains on optimism Prime Minister Shinzo Abe will succeed in beating deflation and as a weaker yen improved the outlook for exporters.

Toyota Motor Corp. (7203), the world’s biggest carmaker, advanced 5.3 percent. Fortescue Metals Group Ltd., Australia’s third-largest iron-ore producer, jumped 11 percent as the steelmaking ingredient rebounded. Samsung Electronics Co., the world’s largest smartphone maker, sank 5.6 percent after posting second-quarter earnings that missed analyst estimates.

The MSCI Asia Pacific Index gained 0.6 percent to 131.34 this week, while a gauge that excludes Japan declined 1.1 percent. Both measures slumped in June for a second month as a government clampdown on speculative lending in China spurred a cash crunch and after Federal Reserve Chairman Ben S. Bernanke said policy makers may start dialing down stimulus if the U.S. economy shows sustained improvement.

“Markets have some potential to pick up from here,” said Angus Gluskie, managing director at White Funds Management in Sydney, who helps oversee about $450 million. “There’s still a degree of nervousness out there as we’re at the juncture when the Federal Reserve is signaling it may reduce stimulus measures. There’s also a clear change of policy direction in China.”

Japanese shares led advances this week, with the Topix (TPX) index rising 4.8 percent, capping its biggest three-week advance since April 2009. The benchmark Nikkei 225 Stock Average climbed 4.6 percent, as the yen weakened beyond 100 to the dollar.

Japan Optimism

The quarterly Tankan index for large manufacturers rose to plus four in June, the Bank of Japan reported on July 1. That exceeded the plus three forecast by 22 economists surveyed by Bloomberg and was the first positive reading since September 2011. A positive figure shows optimists outnumber pessimists.

Japanese consumers expect prices to climb 3 percent over the next 12 months, according to the median result in a Bank of Japan survey released yesterday in Tokyo, in a sign that the reflationary drive by Abe and central bank Governor Haruhiko Kuroda may be working.

Australia’s S&P/ASX 200 Index (AS51) rose 0.8 percent this week as the nation’s central kept the benchmark interest rate at a record low. New Zealand’s NZX 50 Index advanced 1.1 percent. Singapore’s Straits Times Index gained 0.6 percent.

China’s Shanghai Composite Index increased 1.4 percent, its first gain in five weeks, as money-market rates declined. Reports this week added to signs China’s economy is weakening, with official gauge of manufacturing expanding in June at the slowest pace in four months and a services measure by the least since September.

Tolerating Slowdown

Chinese President Xi Jinping said last month officials shouldn’t be judged solely on their record in boosting gross domestic product, the latest signal that policy makers are prepared to tolerate slower economic expansion.

Hong Kong’s Hang Seng Index rose 0.3 percent this week while the Hang Seng China Enterprises Index, Asia’s worst-performing major index this year, dropped 1.1 percent for a seventh decline in eight weeks. South Korea’s Kospi index lost 1.6 percent.

Shares on the MSCI Asia Pacific Index traded at 12.8 times estimated earnings yesterday, compared with 14.8 for the Standard & Poor’s 500 Index and 12.8 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Exporters advanced after reports showed an official gauge of U.S. manufacturing expanded faster than expected in June. Claims for jobless benefits in the world’s biggest economy decreased by 5,000 to 343,000 in the week ended June 29, the Labor Department said July 3. Japanese carmakers and electronics manufacturer also gained after the yen fell for a third week, which will boost the value of their overseas income when repatriated.

Canon Shares

Canon Inc., the world’s biggest camera maker, gained 4.3 percent to 3,375 yen. Li & Fung Ltd. (494), a supplier of toys and clothes to retailers including Wal-Mart Stores Inc., jumped 3.8 percent to HK$11.06 in Hong Kong.

United Spirits Ltd. surged 17 percent to 2,533.35 rupees this week in Mumbai. Diageo Plc, the world’s biggest distiller, gained control of United Spirits after completing the final stage of a transaction to acquire a stake in the Indian maker of Bagpiper whiskey.

Among stocks that declined, Samsung Electronics slipped 5.6 percent to 1,267,000 won in Seoul. Operating profit rose to about 9.5 trillion won ($8.3 billion) in the three months ended June from 6.5 trillion won a year earlier, the company said in preliminary earnings released July 5. That compares with the 10 trillion-won average of 34 analyst estimates compiled by Bloomberg.

China Rongsheng Heavy Industries Group Holdings Ltd., the nation’s biggest shipyard outside state control, tumbled 21 percent to 89 Hong Kong cents after seeking government financial support as orders plunged.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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

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