Asian Stocks Post Two-Week Gain on Yen, U.S. Optimism

Asian stocks rose, with the regional benchmark index posting a two-week advance, as the yen capped its steepest weekly decline this year after the Bank of Japan boosted lending programs and U.S. manufacturing expanded.

Toyota Motor Corp. (7203), which gets 31 percent of its sales in North America, gained 2.9 percent in Tokyo. BHP Billiton Ltd., the world’s largest mining company, climbed 3.9 percent in Sydney after posting first-half profit that beat estimates. China Petroleum & Chemical Corp., Asia’s biggest refiner, surged 8.4 percent in Hong Kong after the company also known as Sinopec said it’s seeking investment for a stake in its retail unit.

The MSCI Asia Pacific Index advanced 1.5 percent to 137.40 this week. Through yesterday the equity benchmark has climbed 1.9 percent this month, rebounding from a January slump, as Federal Reserve Chair Janet Yellen’s first testimony to Congress boosted optimism in the world’s biggest economy. Reports this week showed U.S. factory activity in February surpassed economists’ estimates, while the number of Americans applying for jobless benefits dropped. The yen fell as much as 0.9 percent against the dollar.

“Investors have used the January selloff as an opportunity to hunt for bargains,” Desmond Chua, an analyst at CMC Markets in Singapore, said by phone. “Valuations in Asia look fair. In order for the markets to continue this current upward trajectory, economic data has to outperform a lot more.”

The MSCI Asia Pacific Index traded yesterday at 12.9 times estimated earnings of its constituent companies, compared with 15.6 for the Standard & Poor’s 500 Index and 14.5 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

BOJ Lending

Japan’s Topix index advanced 3.3 percent this week, the biggest such gain in three months. The central bank pledged to maintain plans to expand the monetary base by 60 trillion yen to 70 trillion yen ($585 billion to $682 billion) per year and boosted lending programs as policy makers seek to revive the world’s third-biggest economy.

The country’s trade deficit jumped 71 percent to a record 2.79 trillion in January as surging import costs weigh on Prime Minister Shinzo Abe’s campaign to drive a sustained recovery. While the yen’s 18 percent decline against the dollar last year has led companies from Toyota to Mitsubishi Motors Corp. to forecast record profits, inflation driven by higher import costs is squeezing households.

Japan is in a unique situation as the BOJ continues to add stimulus, while the Fed is beginning to taper,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital, which manages $131 billion. “Liquidity tightening in China shouldn’t be a concern as policy makers need to mop up excess liquidity. There’s enough credit available in China to support growth.”

Draining Liquidity

China’s central bank sold repurchase contracts this week for the first time since June, draining funds from the banking system. The move came after aggregate financing, the broadest measure of credit, climbed to a record 2.58 trillion yuan ($424 billion) in January, data showed Feb. 15.

The Shanghai Composite Index (SHCOMP) advanced on Feb. 17 after the credit report before ending the week 0.1 percent lower. A private gauge of the nation’s manufacturing fell to a seven-month low, data showed Feb. 20.

Hong Kong’s Hang Seng Index jumped 1.2 percent on the week. South Korea’s Kospi index increased 0.9 percent, while Taiwan’s Taiex index rose 1 percent. Australia’s S&P/ASX 200 Index climbed 1.5 percent, and New Zealand’s NZX 50 Index added 0.8 percent. Singapore’s Straits Times Index gained 2 percent.

Group of 20 finance ministers meet in Sydney today, as U.S. stimulus cuts and political turmoil from Ukraine to Venezuela stoke concern over emerging-market volatility. Accommodative monetary policy in advanced economies “will need to normalize in due course, in line with stronger growth,” according to a draft communique seen by Bloomberg.

Global Rebound

Global stocks erased 2014 losses this week as growing confidence in the U.S. economy helped restore $3 trillion of value. The MSCI All-Country World Index rebounded, lifting the value of world equities to $62.1 trillion on Feb. 17 from this year’s low of about $59 trillion on Feb. 4, data compiled by Bloomberg showed.

“At this stage we remain cautious,” Angus Gluskie, who helps oversee about $550 million as a fund manager at White Funds Management in Sydney, said by phone. “The rally that we’ve seen in the past week has been very rapid and that could sometimes be problematic. We’d like to see a bit more data.”

Exporters Climb

Exporters advanced. Toyota rose 2.9 percent to 5,982 yen in Tokyo. Nintendo Co., the world’s biggest maker of video-game consoles, jumped 6.9 percent to 12,580 yen. James Hardie Industries SE (JHX), a building materials supplier that gets about 70 percent of sales from the U.S., climbed 3.4 percent to A$13.96 in Sydney.

Canon Inc. (7751) jumped 3.7 percent to 110 yen in Tokyo after the world’s biggest camera maker announced plans to buy back 50 billion yen of its shares.

Samsung Electronics Co. gained 2.2 percent to 1.33 million won in Seoul as the world’s largest maker of smartphones prepares to unveil a high-end Galaxy phone next week.

BHP rose 3.9 percent to A$39.17 in Sydney. The miner said underlying profit rose 31 percent from a year earlier to $7.8 billion in the six months to Dec. 31, beating the median forecast of $6.9 billion in a Bloomberg survey of seven analysts.

Of the 375 companies on the MSCI Asia Pacific Index that reported earnings since the beginning of the year and for which estimates were available, 53 percent exceeded expectations, according to data compiled by Bloomberg.

Seek, Sinopec

Seek Ltd. surged 22 percent to A$16.14 as the online hiring company reported higher profit and said a unit will acquire a rival website.

Sinopec jumped 8.5 percent to HK$6.54 in Hong Kong as it seeks private investors for as much as 30 percent of its oil retail unit, in a sale that could raise more than $20 billion. The shares pared their weekly advance yesterday after Jefferies Hong Kong Ltd. said the company’s plans to seek investors are aimed at raising capital instead of reforming the state-controlled energy producer.

Among stocks that fell, Rakuten Inc. plunged 12 percent to 1,463 yen in Tokyo after the online retailer announced its $900 million acquisition of Viber, an Internet messaging and calling service.

“Direct monetization of the Viber business is likely to take a long time,” Oliver Matthew, an analyst at CLSA Asia-Pacific Markets in Tokyo, wrote in a note. The brokerage cut its rating on the stock to underperform from buy.

Lenovo Group Ltd. tumbled 9.3 percent to HK$7.90 in Hong Kong. Bank of America Corp.’s Merrill Lynch downgraded the maker of computers and handsets to underperform from buy, citing concern about the time it will take to turn around Motorola Mobility. The Beijing-based company has spoken to U.S. regulators and is working to get approval to buy Motorola from Google Inc. for $2.91 billion in cash and stock.

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

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

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