Asia Stock Futures Rise as China Economic Growth Concerns Ease

Asian stock futures rose, indicating the regional equities gauge will rebound from its biggest drop in two weeks, as concern eased that a slowdown in Chinese growth will curb earnings ahead of the release of inflation data.

American Depositary Receipts of Komatsu Ltd. (6301), the world’s second-biggest maker of construction and mining equipment, gained 1 percent from the closing level in Tokyo. ADRs of Rio Tinto Group (RIO), the No. 2 mining company, gained 0.3 percent in New York as metals prices rose. Shares of Olympus Corp. (7733) may be active in Tokyo after the largest endoscope maker said it plans to sell as much as 118 billion yen ($1.2 billion) of shares.

Futures on Japan’s Nikkei 225 Stock Average (NKY) expiring in September closed at 14,310 in Chicago yesterday, up from 14,100 at the close in Osaka, Japan. They were bid in the pre-market at 14,300 in Osaka at 8:05 a.m. local time. Futures on Australia’s S&P/ASX 200 Index advanced 0.5 percent and New Zealand’s NZX 50 Index rose 0.4 percent. Futures on Hong Kong’s Hang Seng Index gained 0.9 percent.

“The medium case for equities remains decent,” Binay Chandgothia, a fund manager at Principal Global Investors in Hong Kong, where he helps oversee $280 billion, said by telephone. “Economic growth is chugging along. Most of the slowdown in China is captured nicely in valuations.”

The MSCI Asia Pacific Index, the benchmark regional equities gauge, fell 10 percent through yesterday from a five-year high on May 20 amid concern the U.S. Federal Reserve will begin tapering stimulus as China’s economy slows and Japan puts off unveiling economic reform policies until after upper house elections later this month. The measure yesterday declined 1.5 percent, the most since June 24.

Relative Value

That left the Asia-Pacific gauge trading at 12.7 times average estimated earnings yesterday compared with 14.9 for the S&P 500 and 13 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Goldman Sachs Group Inc. and China International Capital Corp. were among brokerages in the past two weeks that reduced projections for Chinese economic growth this year to 7.4 percent, below the government’s 7.5 percent goal.

China’s statistics bureau is scheduled to release June data on inflation today. Consumer prices probably rose 2.5 percent last month, compared with a 2.1 percent gain in May, according to the median estimate of 40 economists surveyed by Bloomberg. Declines in producer prices probably narrowed to 2.6 percent from 2.9 percent, according to the survey.

U.S., China

The U.S. expressed approval of steps the People’s Bank of China took during a credit crunch last month, as officials from the world’s two biggest growth engines prepared to hold economic talks in Washington.

The PBOC’s delay in providing liquidity in interbank markets in recent weeks signaled to market participants that they need to have more discipline and greater prudence in lending decisions, Obama administration officials said during a briefing yesterday. The U.S.-China Strategic and Economic Dialogue is scheduled for July 10-11.

Futures contracts on the Hang Seng China Enterprises Index of mainland Chinese companies trading in Hong Kong advanced 1.1 percent. The Bloomberg China-US Equity Index of the most-traded Chinese shares in the U.S. dropped 0.1 percent in New York yesterday.

Futures on the Standard & Poor’s 500 Index (SPX) added 0.1 percent. The S&P 500 advanced 0.5 percent yesterday, a third day of gains, as the start of corporate earnings season fueled increased optimism about growth in the world’s largest economy.

Japan’s Topix index last week capped its biggest three-week advance since April 2009 amid a weakening yen and optimism Prime Minister Shinzo Abe will push through economic reforms after winning upper-house elections on July 21.

The London Metal Exchange LMEX Metals Index gained 1.2 percent, the most in a week, in London yesterday.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

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

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