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Asian Stocks Rise This Week on U.S. Debt Talk Progress

Asian stocks rose this week, sending the benchmark index to its biggest advance in three weeks, amid optimism U.S. lawmakers would make a deal to raise the nation’s borrowing cap and avert a default. Japanese shares advanced as the yen weakened.

Honda Motor Co. (7267), a carmaker that gets half its sales in North America, gained 5.5 percent this week in Tokyo. MGM China Holdings Ltd., a casino operator controlled by MGM Resorts International, jumped 5.4 percent this week in Hong Kong after table revenue rose during the National Day holidays. Hiwin Technologies Corp. (2049) surged 9.1 percent in Taipei after the ball-bearing manufacturer reported higher sales. Rakuten (4755) Inc., an online mall operator, slumped 19 percent in Tokyo after Yahoo Japan Corp. said it would scrap vendor fees for its shopping and auction sites.

The MSCI Asia Pacific Index rose 1.3 percent to 140.91 this week, after dropping last week as the U.S. government entered a partial shutdown and concern mounted that the political impasse could lead to default. The benchmark rebounded after Republican House Majority Leader Eric Cantor said Republicans and Democrats will seek a “path forward” on the $16.7 trillion debt ceiling.

“Shares climbed on the impression U.S. talks have progressed, but there’s a chance we may see another mess before things are resolved,” said Kenichi Hirano, a Tokyo-based market analyst at Tachibana Securities Co. “Investors are cautious about selling too aggressively.”

Stocks also climbed after Federal Reserve Vice Chairman Janet Yellen, an architect of its stimulus program, was nominated to lead the central bank. Yellen isn’t among the Fed policy makers who have pressed this year to pare asset purchases.

Relative Value

Asia’s benchmark index was valued at 13.55 times estimated earnings yesterday, compared with multiples of about 15.35 for the Standard & Poor’s 500 Index and 14.26 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

The International Monetary Fund this week trimmed China’s forecast for economic growth to 7.6 percent this year from a 7.8 percent estimate in July. Global growth will be 2.9 percent this year, down from a projection of 3.1 percent, with the outlook factoring in a short U.S. government shutdown and agreement on the debt limit before the Oct. 17 deadline.

Japan’s Topix index climbed 2.9 percent this week amid optimism the dollar will strengthen after Federal Reserve minutes from last month’s meeting indicated tapering of stimulus was likely this year. The Nikkei 225 Stock Average climbed 2.7 percent.

Hong Kong’s Hang Seng Index (HSI) rose 0.3 percent this week. Hang Seng China Enterprises Index, the gauge of mainland stocks also known as the H-share index, added 0.6 percent.

China Reopens

China’s Shanghai Composite Index climbed 2.5 percent this week after reopening from a week-long holiday on Oct. 8. HSBC Holdings Plc’s and Markit Economics’ purchasing managers’ index showed growth in the nation’s service industries slowed to 52.4 in September from 52.8 in August, with 50 the dividing line between expansion and contraction.

Taiwan’s Taiex index slid 0.2 percent. Hiwin jumped 9.1 percent to NT$223, leading gains on MSCI Asia Pacific Industrials Index, which had the biggest advance among the regional gauge’s 10 subgroups. Shares climbed after sales last month advanced 19 percent from a year earlier.

Singapore’s Straits Times Index 1.3 percent.

Australia’s S&P/ASX 200 Index (AS51) gained 0.4 percent this week. Data showed the nation’s unemployment rate expectedly dropped in September, while business confidence surged last month to the highest in 3 1/2 years.

Republican Proposal

The S&P 500 (SPX) rallied the most since January on Oct. 10 after House Speaker John Boehner and other party leaders met with President Barack Obama. Republicans proposed a short-term increase in the cap that would reduce prospects for a default by pushing the lapse of U.S. borrowing authority to Nov. 22 from Oct. 17. The plan wouldn’t end the partial shutdown of the government, which is going into its 12th day.

A stoppage lasting through the end of this week could cost the economy 0.2 percentage point in growth, according to the median estimate in a Bloomberg survey of economists. The damage escalates to a 0.5 point loss if it carries through Oct. 25. The closure has also pushed out expectations for when Fed will start to taper monetary stimulus.

The yen yesterday headed for a four-day decline against the dollar. Honda climbed 5.5 percent to 3,915 yen this week in Tokyo. Toyota Motor Corp. (7203), a carmaker that gets about a third of its sales in North America, climbed 3.7 percent to 6,410 yen.

MGM China

Macau’s table revenue from gaming rose 38 percent to about HK$1.68 billion a day from Oct. 1-6, according to Barclays Capital Asia. MGM China jumped 5.4 percent to HK$27.35 in Hong Kong.

Developers led gains this week in Hong Kong. China Resources Land Ltd. surged 6.1 percent to HK$23.35. Country Garden Holdings Co. (2007), controlled by China’s richest woman Yang Huiyan, jumped 9.7 percent to HK$5.55 after exceeding its 2013 property sales target by the end of September.

Investors should prepare for a fourth-quarter rally by Chinese developers as sales over the holiday week indicate the property market turned “very hot” since September, Citigroup Inc. wrote in a note dated Oct. 8.

Rakuten had the biggest drop this week on the Asian equity benchmark, tumbling 19 percent to 1,138 yen in Tokyo. Its equity rating was cut to neutral from buy at Goldman Sachs Group Inc., which said the e-commerce company’s monthly tenant fees may come under pressure after Yahoo Japan cut fees for online stores. Yahoo Japan slid 10 percent to 502 yen this week.

Hong Kong Exchanges & Clearing Ltd. on Oct. 10 said it raised the discount for using some U.S. Treasury bills as collateral to take into account a possible U.S. default. The change only affects the clearing house for index futures and options, bourse spokeswoman Lorraine Chan said.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

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