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Asian Stocks Advance to 10-Week High on Earnings Speculation

Asian Stocks Rise for Fourth Day as Canon Climbs on Earnings
The MSCI Asia Pacific Index climbed 0.7 percent to 118.88 as of 11:33 a.m. in Tokyo, extending its gain in the past four days to 2.9 percent. Photographer: Kimimasa Mayama/Bloomberg

Asian stocks rose, driving the MSCI Asia Pacific Index to the highest level in more than 10 weeks, as a surge in earnings at Canon Inc. and China’s industrial companies boosted confidence in the region’s corporate profits.

Canon, the world’s largest camera maker, surged 5.7 percent in Tokyo as JPMorgan Chase & Co. upgraded the company after its second-quarter profit quadrupled. Baoshan Iron & Steel Co. gained 2.9 percent in Shanghai after China’s statistics bureau reported a 72 percent surge in industrial companies’ first-half earnings. Fuji Heavy Industries Ltd., the maker of Subaru cars, climbed 6.8 percent on increased production.

“People are buying on optimism the global economy is on an uptrend after seeing those positive earnings reports,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion.

The MSCI Asia Pacific Index climbed 1.1 percent to 119.36 as of 7:23 p.m. in Tokyo, the highest level since May 14. The gauge has slumped 7.6 percent from its high this year on April 15 on concern Europe’s debt crisis and Chinese steps to curb property prices will slow global growth.

Japan’s Nikkei 225 Stock Average climbed 2.7 percent as a weaker yen boosted prospects for the country’s exports. China’s Shanghai Composite Index rose 2.3 percent, extending gains from its 2010 low to 11 percent. Hong Kong’s Hang Seng Index rose 0.6 percent. Australia’s S&P/ASX 200 Index gained 0.7 percent.

Futures on the U.S. Standard & Poor’s 500 lost 0.2 percent. The gauge slipped 0.1 percent as a gauge of consumer confidence retreated to a five-month low.

‘Positive Surprise’

Canon jumped 5.7 percent to 3,715 yen. Net income more than quadrupled to 67.6 billion yen ($770 million) in the three months ended June 30 from a year earlier, exceeding the median analyst estimate of 58 billion yen in a Bloomberg News survey.

“Canon’s result was a positive surprise,” Hisashi Moriyama, a Tokyo-based analyst at JPMorgan Chase & Co., wrote in a report today. “Strong earnings had already been expected but Canon showed an even bigger gain.” He raised the stock’s rating to “overweight” from “neutral.”

Baoshan Steel, the listed unit of China’s second-biggest steelmaker, added 2.9 percent to 6.41 yuan. China Erzhong Group Deyang Heavy Industries Co., an equipment supplier to power producers, gained 2.7 percent to 10.27 yuan.

Profits of Chinese industrial companies in 24 regions jumped 72 percent to 1.61 trillion yuan ($237.5 billion) in the first half of 2010 from a year earlier, the statistics bureau said today in a statement on its website. The nation’s economic fundamentals remain “good,” the People’s Bank of China said on its website yesterday

Cement Producers

“A double-dip for China’s economy seems unlikely,” said Zhang Ling, a fund manager at Shanghai River Fund Management Co. “The rebound will carry on for a while as stocks are cheap and earnings of some companies have beaten expectations.”

Chinese cement producers rose after the Economic Information Daily said China aims to eliminate inefficient cement capacity and close polluting factories. Mergers and consolidations among cement makers are set to accelerate, according to the newspaper.

Anhui Conch Cement Co., China’s biggest cement maker, soared 10 percent to 19.58 yuan in Shanghai. China Resources Cement Holdings Ltd. surged 6.5 percent to HK$3.77 in Hong Kong.

In Tokyo, Fuji Heavy Industries advanced 6.8 percent to 488 yen after reporting total production in June climbed 70 percent from a year ago.

Lower Valuations

Speculation economic growth may falter dragged down the MSCI Asia Pacific Index by as much as 9.6 percent this year, cutting the average price of stocks in the gauge to the lowest level since December 2008. The index’s companies now trade at 14.4 times estimated profit, compared with 13.4 times for the S&P 500 Index and 12 times for the Stoxx Europe 600 Index.

The New York-based Conference Board reported yesterday that its index of consumer confidence fell to 50.4 in July from a revised 54.3 in June. The gauge was forecast to drop to 51, according to economists in a Bloomberg News survey.

Banks contributed the most to the gains in the MSCI Asia Pacific Index on mounting speculation the relaxation of proposed capital standards will ease financing needs.

HSBC Holdings Plc, Europe’s largest bank, gained 2.6 percent to HK$80.90 in Hong Kong, while London-based Standard Chartered Plc rose 3.3 percent to HK$232. Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, climbed 3.6 percent to 433 yen.

Softer Rules

The Basel Committee on Banking Supervision, which represents central banks and regulators in 27 nations and sets capital standards for banks worldwide, announced on July 26 softer capital rules proposed for lenders. The proposals were welcomed by firms including Deutsche Bank AG and UBS AG, which yesterday reported better-than-estimated profit.

The Basel Committee was asked by Group of 20 leaders to draft rules in the aftermath of the credit crisis. A gauge of finance stocks in the MSCI World Index surged 1.7 percent yesterday to a more than 10-week high.

“There has been positive response by investors overnight to the updated paper” from the Basel Committee, RBS Royal Bank of Scotland Group Plc analysts wrote in an e-mail today. “The amendments are positive for the banking sector.”

Japanese exporters gained on optimism a weaker yen will boost the value of overseas sales. Sony Corp. increased 2.7 percent to 2,608 yen. Honda Motor Co., which gets more than 80 percent of its sales abroad, gained 2.2 percent to 2,708 yen. Nissan Motor Co., a carmaker that counts North America as its biggest market, jumped 3.6 percent to 657 yen.

Weaker Currency

The Japanese currency depreciated to 114.44 against the euro today, compared with 113.17 at the close of stock trading in Tokyo yesterday. Against the dollar, it weakened to 88.07 from 86.98. A weaker yen boosts the value of overseas income at Japanese companies when repatriated.

“The weaker yen spread a sense of security, since the currency’s moves are what affect Japanese stocks the most,” said Masatsugu Okeya, a fund manager at Chiba-Gin Asset Management Co. “Good news, including positive earnings results, is drawing the attention of investors.”

Among shares that declined, Korean Air Lines Co., South Korea’s largest carrier, slumped 5.1 percent to 74,000 won and EVA Airways Corp., Taiwan’s second-largest air carrier, slid 2.5 percent to NT$19.60. BofA Merrill Lynch Global Research cut its recommendations on the two stocks to “underperform” from “buy,” citing slowing cargo demand.

Hong Kong property developers fell after the government sold a building site for HK$10.4 billion ($1.34 billion), lower than the HK$10.5 billion median estimate of analysts in a Bloomberg News survey.

Hang Lung Properties Ltd., which reported lower-than-estimated profit today, slumped 3.1 percent to HK$32.60. Sun Hung Kai Properties Ltd., the world’s biggest developer by market value, slipped 1.1 percent to HK$113.20.

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