Asian stocks outside of Japan rose for a third week as Chinese equities advanced amid government pledges to do more to support transition in the world’s No. 2 economy. Japanese shares retreated as the yen strengthened.
Industrial & Commercial Bank of China Ltd., the world’s second-biggest lender by market value, gained 3.9 percent in Hong Kong as Chinese Premier Li Keqiang said economic growth won’t fall below 7 percent. ZTE Corp., China’s second-largest maker of equipment for phone networks, surged 19 percent after reporting higher first-half profit. Canon Inc., the world’s biggest camera maker, sank 6.5 percent in Tokyo after cutting its profit forecast for this year.
The MSCI Asia Pacific Excluding Japan Index added 1.9 percent to 447.69 this week as Chinese shares led gains. The benchmark MSCI Asia-Pacific Index, up 0.4 percent on the week, has fallen 6.2 percent from this year’s high on May 20 through July 26 amid signs China’s economy is slowing and on concern the Federal Reserve will start tapering monetary stimulus as the U.S. economy improves.
Li’s statement “helped to reassure investors,” Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which oversees about $207 billion, said by telephone. “China could introduce some kind of fiscal stimulus to help stabilize the economy. While there’s a likelihood the Fed will start tapering monetary stimulus in September, we don’t expect the Fed to start raising rates until the end of 2014. We remain overweight on equities.”
Half of the economists surveyed by Bloomberg say the Federal Reserve will in September begin tapering its bond-buying program that has supported bond and equity gains.
Shares on the MSCI Asia Pacific Index traded at 13.2 times estimated earnings as of yesterday, compared with 15.2 times for the Standard & Poor’s 500 Index and 13.5 times for the Stoxx Europe 600 Index.
The Shanghai Composite Index climbed 0.9 percent this week. The Hang Seng China Enterprises Index of mainland companies traded in Hong Kong advanced 3.3 percent, its biggest weekly gain since May 10. The benchmark Hang Seng Index gained 2.8 percent.
Chinese shares rallied as Premier Li’s commitment to support growth overshadowed a weaker manufacturing report. China’s “bottom line” for gross domestic product growth is 7 percent and the nation can’t let growth go below that, Beijing News reported on July 23, Li’s comments at a recent meeting with economists and business people.
South Korea’s Kospi index rose 2.1 percent this week, while Taiwan’s Taiex index added 1.1 percent. Australia’s S&P/ASX 200 Index gained 1.4 percent and New Zealand’s NZX 50 Index increased 1 percent.
Japan’s Topix (TPX) index dropped 3.7 percent this week and the Nikkei 225 Stock Average sank 3.2 percent. Both gauges retreated for the first time in six weeks as the Japanese yen strengthened.
Investor attention in Japan has shifted to whether the government will cut corporate taxes, ease regulations, loosen labor laws, join the Trans-Pacific Partnership free-trade agreement and raise the sales tax as planned. Prime Minister Shinzo Abe’s victory in the July 21 upper-house election gave him a freer hand to execute economic reforms.
“There’s a feeling that stocks are overheating, so after gains there’s going to be a lot of profit taking,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender by market value. “Still, with expectations for Abenomics and Japan’s economic recovery, we probably won’t see big declines.”
Chinese lenders and developers rose. ICBC, as China’s biggest bank is known, climbed 3.9 percent to HK$5.11. China Construction Bank Corp. (939) advanced 5.3 percent to HK$5.78. CSR Corp., the nation’s biggest trainmaker, surged 9 percent to HK$5.35.
ZTE jumped 19 percent to HK$13.74 this week after saying first-half net income rose 23 percent to 302.3 million yuan ($49 million).
Daihatsu Motor Co., the minicar maker 52 percent owned by Toyota Motor Corp., advanced 5.7 percent to 2,188 yen in Tokyo after first-quarter profit beat analysts’ estimates.
Of the 108 companies on the MSCI Asia Pacific Index that reported quarterly earnings since July 1 and for which estimates are available, 51 percent exceeded analyst estimates, according to data compiled by Bloomberg.
Among stocks that fell, Canon slumped 6.5 percent to 3,165 yen this week in Tokyo after cutting its profit forecast by 10 percent.
Toyota fell 5 percent to 6,150 yen as General Motors Co. outsold Japan’s biggest carmaker for the first time in six quarters.
Japanese exporters also declined as the yen advanced this week. A stronger yen reduces the value of overseas income at carmakers and electronics manufacturers when repatriated. Honda Motor Co. (7267), which gets about 83 percent of sales abroad, lost 2.2 percent to 3,790 yen. Sony Corp., the maker of Bravia televisions and PlayStation game consoles, lost 2.5 percent to 2,133 yen.
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