Asian Stock Gauge Follows U.S. Advance After China Data

Asian stocks rose, with the Hang Seng Index (HSI) erasing its loss for the year, after China inflation quickened to the fastest pace in four months. Casino shares dropped in Hong Kong.

LG Display Co. (034220), a supplier of panels for Apple Inc., jumped 6.4 percent in Seoul after Macquarie Group Ltd. recommended the stock. Mitsubishi UFJ Financial Group Inc. added 1.2 percent after Bank of America Corp.’s Merrill Lynch unit recommended buying the shares. SJM Holdings Ltd. sank 5.2 percent in Hong Kong as casino operators slid amid speculation a crackdown on the use of China UnionPay Co.’s debit cards will curb money flows to the world’s largest gambling hub.

The MSCI Asia Pacific Index rose 0.3 percent to 143.88 as of 5:55 p.m. in Hong Kong, for a fourth day of gains. The measure rallied 10 percent through yesterday from this year’s low in February amid signs of stronger manufacturing in China and as authorities there eased bank collateral rules, while U.S. data signaled a recovery is intact. China’s inflation accelerated in May on food costs, while a decline in factory-gate prices moderated, data released today showed.

“We’re still overweight on risk assets given the positive global growth outlook,” Daphne Roth, the Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion said by phone. “Time is ripe for a small correction as the market has gone up so much.”

China Stimulus

Hong Kong’s Hang Seng Index climbed 0.9 percent, with the benchmark index erasing this year’s loss, amid optimism that Chinese policy makers will act to counter the nation’s economic slowdown. The Hang Seng China Enterprises of Index of mainland companies traded in the city and China’s Shanghai Composite Index both increased 1.1 percent.

“China is restarting its stimulus program and boosting investor sentiment,” said Benjamin Tam, a Hong Kong-based portfolio manager at IG Investment Ltd. “The market is hoping the government will launch more stimulus later on and drive up growth in the second half.”

South Korea’s Kospi index both advanced 1.1 percent. Taiwan’s Taiex index jumped 0.7 percent. Australia’s S&P/ASX 200 Index added 0.1 percent. Japan’s Topix index fell 0.5 percent and New Zealand’s NZX 50 Index (NZSE50FG) slid 0.2 percent. Singapore’s Straits Times Index dropped 0.3 percent.

China CPI

China consumer prices rose by 2.5 percent in May from a year earlier in China after expanding 1.8 percent in the previous month, the National Bureau of Statistics reported today. Economists surveyed by Bloomberg were expecting a 2.4 percent increase. The government has set a full-year target of 3.5 percent inflation, which leaves room for more monetary easing. Producer prices fell 1.4 percent last month, according to the report. Economists had predicted a 1.5 percent decline.

“Markets aren’t likely to fall unless economic data disappoint,” Toby Lawson, head of futures, options and cash equities trading for Asia Pacific at Newedge Group SA in Sydney, said by phone. “Recent Chinese data looked OK. The government has got the capacity to smooth growth lines if necessary.”

The People’s Bank of China announced a cut in reserve requirements for some banks yesterday, with leaders in Asia’s largest economy seeking to bolster domestic demand amid slowing growth.

Nine Dragons Paper Holdings Ltd. surged 6.6 percent to HK$5.49. Citigroup Inc. said China central bank’s cut in reserve requirement ratios will help the paper-making sector by improving liquidity.

U.S. Futures

Futures on the Standard & Poor’s 500 Index slipped 0.2 percent. The U.S. equity benchmark added 0.1 percent yesterday to close at a record as small-cap shares rallied and Family Dollar Stores Inc. advanced with Analog Devices Inc. amid deals activity.

Shares on the MSCI Asia Pacific Index traded at 13.2 times estimated earnings, compared with a multiple of 16.5 for the S&P 500 and 15.6 for the Stoxx Europe 600 Index.

LG Display climbed 6.4 percent to 29,100 won in Seoul. Macquarie raised its rating on the stock to outperform from neutral and increased its share-price forecast to 36,000 won from 25,000 won. The South Korean company is in talks to supply Panasonic Corp. with big-screen TV panels, people familiar with the matter said just before the market closed.

LG Innotek

LG Innotek Co., which supplies camera modules for smartphones, jumped 7.6 percent to 134,000 won, the highest close since February 2011 and the biggest advance on the MSCI Asia Pacific Index (MXAP) today. HI Investment & Securities Co. raised its share-price forecast on the stock to 180,000 won from 140,000 won and maintained its buy rating.

Mitsubishi UFJ gained 1.2 percent to 602 yen in Tokyo. Merrill Lynch raised its stock rating to buy from neutral, saying the bank is one of its top share picks because of its earnings outlook.

Casino stocks fell in Hong Kong today. The Macau Monetary Authority ordered jewelry shops and pawnshops operating on casino floors to remove their UnionPay card terminals by July 1, according to the head of SJM, the city’s biggest casino operator. The banking regulator didn’t immediately reply to an e-mail or answer calls seeking confirmation.

SJM sank 5.2 percent to HK$19.20, extending its two-day drop to 11 percent. Galaxy Entertainment Group Ltd. (27), founded by billionaire Lui Che-woo, dropped 1.5 percent to HK$55.95. Wynn Macau Ltd. declined 4.6 percent to HK$28.75.

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

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

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