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Asian Stock Index Extends Six-Year High Ahead of Fed

July 29 (Bloomberg) -- Grant’s Interest Rate Observer Editor Jim Grant discusses Fed monetary policy on “Bloomberg Surveillance.” (Source: Bloomberg)

Asian stocks rose for a third day, with the regional benchmark index extending a six-year high, ahead of a Federal Reserve meeting starting today.

Nissan Motor Co. climbed 1.9 percent after the carmaker’s earnings beat analyst estimates on higher sales in China. Keyence Corp. jumped 3 percent in Tokyo after the supplier of sensors and measuring instruments reported a 33 percent increase in first-quarter net income. QBE Insurance Group Ltd. tumbled 11 percent after Australia’s second-biggest insurer said profit in the six months ended June 30 may fall 18 percent due to higher claims in Argentina.

The MSCI Asia Pacific Index (MXAP) added 0.3 percent to 149.58 as of 6:42 p.m. in Hong Kong. The gauge is heading for a 2.6 percent advance this month. The Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong, also known as the H-Share index, entered a bull market yesterday, rising 20 percent from a March 20 low after policy makers deployed targeted stimulus to meet economic growth targets.

“The equities rally will continue for the rest of the year,” Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $207 billion, said by phone. “We’re seeing economic growth filtering through to corporate earnings. While Fed tapering will continue, we believe the earliest interest-rate increase will only happen by the middle of next year. The Fed is very clear that they will only raise rates provided the economy continues to recover.”

Regional Gauges

South Korea’s Kospi index gained 0.6 percent to its highest since August 2011, as foreign investors boosted equity holdings by $2.9 billion this month. The country’s current account surplus narrowed to $7.92 billion in June from a revised $9.08 billion in May, the Bank of Korea said today.

Hong Kong’s Hang Seng Index climbed 0.9 percent to its highest close since November 2010, while the H-Share index gained 0.5 percent. China’s Shanghai Composite Index and Australia’s S&P/ASX 200 Index both added 0.2 percent.

Japan’s Topix (TPX) index rose 0.3 percent. Singapore’s Straits Times index gained 0.2 percent. New Zealand’s NZX 50 Index slid 0.4 percent, while Taiwan’s Taiex index fell 0.3 percent. Markets in Indonesia, Malaysia, the Philippines, Sri Lanka and India are closed for holidays.

The MSCI Asia Pacific Index traded at 13.5 times estimated earnings compared with 16.6 for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

“Equity valuations are by no means stretched at the current levels,” John Brady, managing director for global futures and options at RJ O’Brien & Associates LLC in Chicago, told Bloomberg Television. “Economic growth is strong enough for investors’ appetite. There’s a lot of cash on the sidelines that can be put to work on any sort of dip in the market.”

Earnings Performance

The MSCI Asia Pacific Index is heading for its third monthly advance in July, the longest such streak since April 2013, as a gauge of Chinese manufacturing added to signs Asia’s biggest economy is stabilizing and earnings at companies including Fanuc Corp. and Kia Motors Corp. beat estimates. Of the companies on the Asia-Pacific benchmark that have posted results since the beginning of July and for which Bloomberg has estimates, 58 percent beat earnings expectations.

Nissan Motor climbed 1.9 percent to 1,020 yen in Tokyo. Net income at the maker of Altima sedans rose 37 percent from a year earlier to 112.1 billion yen ($1.1 billion) in the April-to-June quarter, beating the 84.3 billion-yen average of 14 analyst estimates compiled by Bloomberg.

Keyence added 3 percent to 45,465 yen. The company said net income for the first quarter grew 33 percent from a year earlier to 24.2 billion yen, topping analyst estimates for 22.1 billion yen.

HKEx Surges

Hong Kong Exchanges & Clearing Ltd. (388) jumped 3.5 percent to HK$174.90, capping a sixth daily advance to its highest close since May 2011. Deutsche Bank AG raised its share-price forecast for the bourse operator by 41 percent to HK$202, while Bank of America Corp.’s Merrill Lynch boosted its price target by 23 percent to HK$185. Both brokerages kept their buy ratings.

Cash Financial Services Group Ltd. (510) soared 33 percent to 30 Hong Kong cents after parent Celestial Asia Securities Holdings Ltd said it’s in talks with a third party interested in buying a majority stake in its stocks and futures broking unit.

Chinese developers advanced after the Shanghai Securities News reported that banks in Shanghai, Beijing and Guangzhou may shorten their mortgage-approval process to one month from three months. Easing home-purchase limits will boost sales in the second half, UBS AG said. China Overseas Land & Investment Ltd., the biggest mainland homebuilder traded in Hong Kong, rose 2 percent to HK$23.15. Country Garden Holdings Co. gained 2.9 percent to HK$3.91.

QBE Tumbles

Among shares that fell, QBE tumbled 11 percent to A$10.57. Net income will drop to around $390 million for the six months ended June 30 from $477 million a year earlier, the Sydney-based company today. The insurer boosted its Latin America claims reserve by $170 million due in part to increased workers’ compensation claims in Argentina.

SIA Engineering Co. (SIE) slumped 3.4 percent to S$4.78 in Singapore. Net income dropped 22.5 percent to S$53.5 million ($43.1 million) in the three months ended June 30 from a year earlier, spurring Maybank Kim Eng Holdings Ltd. and UOB-Kay Hian Holdings Ltd. to cut their ratings on the stock to sell.

Futures on the S&P 500 were little changed today. The U.S. benchmark index yesterday added less than 0.1 percent amid optimism over corporate earnings and merger activities.

The Federal Reserve is expected to taper its bond-buying program for the sixth time at a two-day policy meeting that ends tomorrow. Investors will get a reading on second-quarter U.S. economic growth the same day, while the government’s labor report on Aug. 1 may show employers added 231,000 jobs this month.

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 John McCluskey, Jim Powell

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