Asian Stocks Little Changed as China Risk Counters U.S. Stimulus

Asian stocks ended the week almost unchanged as the International Monetary Fund said risks of a slowdown in Chinese growth are increasing while the Federal Reserve allayed concern the U.S. is planning to curb stimulus.

GCL-Poly Energy Holdings Ltd. (3800) surged 13 percent for the week on speculation tariffs on polysilicon shipped to China will cut supplies from the U.S. and South Korea, boosting earnings at the world’s largest maker of materials used in solar panels. Taiwan Semiconductor Manufacturing Co. (2330), the world’s largest contract manufacturer of chips, slumped 11 percent in Taipei after forecasting sales that trailed analyst estimates. Nissan Motor Co., a Japanese carmaker that gets about 80 percent of sales abroad, climbed a third week as the yen weakened against the dollar.

The MSCI Asia Pacific Index ended the week at 134.93, up from 134.88 on July 12, to continue its longest streak of gains since the week ending March 15. Chairman Ben S. Bernanke told a House committee there was no preset course for the U.S. central bank’s asset purchases, tempering speculation the Fed would begin to trim its $85 billion-a-month bond-buying program as early as September.

“The chances are that we see growth in the U.S. economy strengthening over the next 12 months,” David Cassidy, the Sydney-based head of equity strategy for Australia at UBS AG, said by phone. “There’s scope for equities to move higher with earnings growth and a gradual economic recovery.”

Gains Limited

Gains on the benchmark regional equities gauge were limited to 4.3 percent this year, compared with an 18 percent surge on the Standard & Poor’s 500 Index, as concern mounted that a manufacturing slowdown in China and the worst cash shortage in a decade may curb earnings growth. The MSCI Asia Pacific Index is trading at 13.2 times average estimated earnings compared with 15.3 for the S&P 500 and 13.4 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

China’s economy, the world’s second-largest, expanded 7.5 percent in the three months to June 30, a report showed July 15. That matched the median forecast of 45 economists surveyed by Bloomberg.

The International Monetary Fund said July 17 risks are increasing that China’s economic growth will fall short of the institution’s 7.75 percent annual forecast as it urged the nation to follow through on reforms to sustain expansion. Premier Li Keqiang said this month restructuring should proceed as long as growth and employment stay above unspecified limits.

‘Earnings Interest’

“There appears to be very little to stop the growth slowdown in China,” said Matthew Sherwood, head of investment markets research in Sydney at Perpetual Investments, which manages about $25 billion. “The earnings season is taking on renewed interest as companies which have rallied strongly are having to prove their recent surge is justified.”

China in March stepped up a three-year campaign to cool housing speculation, and has studied expanding property-tax trials after implementing them in Shanghai and Chongqing. China’s June new home prices rose in 69 of 70 cities the government tracked from a year earlier, a report showed July 18.

Developers trading in Hong Kong fell for the week amid concern measures to curb rising property prices will remain intact. China Resources Land Ltd., which gets all of its revenue on the mainland, lost 9.6 percent to HK$19.72. China Overseas Land & Investment Ltd. (688) sank 3.7 percent to HK$20.75, and Agile Property Holdings Ltd slid 2.2 percent to HK$7.91.

‘Targeting Developers’

“The Chinese government has been targeting developers for at least three and a half years now, so they’re not operating in a friendly environment,” said Alex Wong, a Hong Kong-based director at Ample Capital Ltd. “You can not expect any easier environment for them in the near term.”

Hong Kong’s Hang Seng Index added 0.4 percent and China’s Shanghai Composite Index fell 2.3 percent. South Korea’s Kospi advanced 0.1 percent. Taiwan’s Taiex index dropped 1.9 percent, as Taiwan Semi fell. The chipmaker is the largest company on the measure, comprising 11 percent of the benchmark.

Australia’s S&P/ASX 200 Index ended the week little changed as the Reserve Bank of Australia said the currency’s decline and interest-rate cuts meant its policy setting was appropriate even as it maintained room for future reductions, according to minutes of its July 2 meeting. New Zealand’s NZX 50 Index fell 0.7 percent.

The Topix climbed 0.8 percent this week, a fifth straight weekly gain. That’s the biggest such advance since April 2009 and the longest winning streak since February. The measure extended gains this year amid optimism Prime Minister Shinzo Abe will push through economic reforms after tomorrow’s upper house elections.

Biggest Gains

Japanese shares have topped gains this year among 24 major developed equity markets tracked by Bloomberg News. The Topix index surged 41 percent and the Nikkei 225 Stock Average soared 40 percent in 2013 as Abe and Bank of Japan Governor Haruhiko Kuroda pushed to stoke the nation’s inflation rate to 2 percent.

Japanese exporters climbed as the yen declined to 100.65 per dollar, from 99.22 per dollar at the end of last week. Nissan climbed 2.4 percent to 1,121 yen, a third week of gains. Honda Motor Co. (7267) advanced 1.8 percent to 3,875 yen.

Victory tomorrow would give Abe’s Liberal Democratic Party-led coalition the strongest grip on power since 2007, strengthening its ability to carry out the three-pronged plan of monetary easing, fiscal stimulus and structural reform known as Abenomics. The LDP and partner New Komeito are on track to secure a majority, according to a poll published in the Nikkei newspaper on July 17.

GCL, Taiwan Semi

GCL soared 13 percent to HK$1.96. The Chinese ruling is “positive” for domestic polysilicon manufacturers such as GCL-Poly because it may reduce supplies from abroad, boosting prices for the raw material in China, Timothy Lam, a Hong Kong-based analyst at Citigroup Inc. wrote in a report July 18. Importers of raw material to make solar panels into China must pay the duties beginning July 24.

Taiwan Semi tumbled 11 percent to NT$98.20 as the Hsinchu, Taiwan-based firm joined Intel Corp. predicting third-quarter sales below analyst expectations. The company forecast third-quarter sales of as much as NT$164 billion ($5.5 billion) in the three months ending September, compared with the NT$164.5 billion average of 25 analyst estimates compiled by Bloomberg before the announcement.

Tencent Holdings Ltd. (700), operator of China’s No. 1 mobile messaging application, jumped 7.8 percent to a record HK$333.80 as the State Council pledged to upgrade telecommunications and Internet infrastructure. Tencent is the best-performing stock on the Hang Seng Index (HSI) this year.

Treasury Wine Estates Ltd., the world’s second-biggest listed winemaker by revenue, slumped 18 percent to A$4.77 in Sydney after saying it would write off A$160 million ($145 million), greater than the company’s expected net income this year. The decision was made to address excess stock in the U.S., Treasury Wine’s largest division by sales, the company said.

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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