Asian Equities Advance; Isuzu, Toshiba Lead Gains in Japan

Asian stocks rose, erasing earlier declines, as Isuzu Motors Ltd. led gains by exporters and Toshiba Corp. climbed after saying profit may beat its earlier forecast.

Isuzu Motors jumped 6.2 percent in Tokyo, even after it denied a report Volkswagen AG is considering taking a stake or purchasing the Japanese truckmaker outright. Toshiba, a nuclear reactor supplier, advanced 2 percent. Sanrio Co., the maker of Hello Kitty character goods, surged 11 percent after saying full-year net income beat its forecast. Hyundai Motor Co. jumped after a report said its Indian unit will introduce two new models a year there.

The MSCI Asia Pacific Index gained 0.2 percent to 136.29 as of 7:58 p.m. in Tokyo, with about the same number of shares gaining as falling. The measure has risen the past three weeks as Japanese companies resumed production after last month’s earthquake, and as an improving U.S. economy bolstered optimism the global recovery can be sustained.

“Generally, expectations are for corporate activity to increase,” said Melbourne-based Tim Schroeders, of Pengana Capital Ltd., which manages about $1 billion. “But we’ve still got a few issues to deal with in the shorter term. Investors are fairly cautious given what’s going on in the region”

Japan’s Nikkei 225 Stock Average gained 0.1 percent, reversing earlier declines of as much as 0.9 percent. Australia’s S&P/ASX 200 Index lost 0.6 percent and New Zealand’s NZX 50 Index retreated 0.1 percent. South Korea’s Kospi index climbed 0.9 percent.

Hong Kong’s Hang Seng Index slid 0.5 percent, while China’s Shanghai Stock Exchange Composite Index lost 0.3 percent. Taiwan’s Taiex index increased 0.3 percent.

U.S. Stocks

Futures on the Standard & Poor’s 500 Index fell 0.5 percent today. In New York, the index rose less than 0.1 percent to 1,314.41 yesterday as a Federal Reserve report fueled optimism the U.S. economy can weather President Barack Obama’s plan to cut spending and raise taxes.

The MSCI Asia Pacific Index lost 1.2 percent this year through yesterday, compared with gains of 4.5 percent by the S&P 500 and 0.9 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark are valued at 13.1 times estimated earnings on average, compared with 13.5 times for the S&P 500 and 11.2 times for the Stoxx 600.

Isuzu jumped 6.2 percent to 310 yen, the biggest gain on the Nikkei 225. Volkswagen AG, Europe’s largest automaker is considering taking a stake or purchasing Isuzu outright, Germany’s Manager Magazin reported yesterday, without citing anyone. Volkswagen said it won’t decide soon on whether to take a stake in Japan’s largest maker of light trucks, while Isuzu also denied the report was true.

Toshiba, Sanrio

Toshiba advanced 2 percent to 404 yen after its president said net income may beat forecasts. Net income for the year ended March 31 may exceed Toshiba’s January estimate, President Norio Sasaki told reporters today in Tokyo.

Sanrio gained 11 percent to 2,565 yen. The company said full-year net income amounted to 9.1 billion yen, 30 percent more than its 7 billion yen outlook, citing its “favorable” overseas license operations.

Hyundai Motor, South Korea’s largest automaker, advanced 4.5 percent to 222,000 won as the biggest support to the MSCI Asia Pacific Index’s gains today. The automaker’s Indian unit will introduce two new models a year until 2014 in the south Asian country to retain its number two sales ranking there, the Wall Street Journal reported, citing Arvind Saxena, the company’s sales head.

Leighton Slumps

Among stocks that declined, Leighton Holdings Ltd., Australia’s biggest builder, tumbled 12 percent to A$24.93, the biggest decline on the MSCI Asia Pacific Index.

The company expects a net loss of A$427 million in the year ending June, compared with an earlier forecast for a profit, it said in an April 11 statement. Leighton also sold new shares at A$22.50 apiece after forecasting A$907 million in writebacks and impairments in the year ending June because of project-cost overruns and charges at its Middle East venture.

In Hong Kong, Chinese banks led declines as speculation on speculation they will need to raise more capital. China Construction Bank Co., the nation’s No. 2 lender, slid 1.5 percent to HK$7.35. Industrial & Commercial Bank of China Ltd., the nation’s biggest lender, dropped 1.2 percent to HK$6.51. Bank of China Ltd., the nation’s third-largest lender by market value, declined 1.1 percent to HK$4.36.

Inflation, Capital Raising

Chinese banks may have to raise about 860 billion yuan ($131 billion) of stock over six years to meet stricter capital rules, according to estimates from the industry regulator, a person with knowledge of the matter said. Lenders are likely to need an additional 1.26 trillion yuan in supplementary capital by the end of 2016, the person said, declining to be named because the calculations aren’t public.

The country’s lenders wrote 679.4 billion yuan in new loans in March, the central bank said today. That compares with the 600 billion yuan median estimate of economists surveyed by Bloomberg.

“The new loans number will add more pressure on banks in the short term,” said Alex Au, managing director in Hong Kong of Richland Capital Management Ltd., which oversees $300 million of assets. “The banks will need to lower their loan growth in the coming few months. If new loan growth is too fast, it will create more inflationary pressure for the economy.”

Also, China’s inflation in March may have risen 5.3 percent to 5.4 percent from a year earlier, Hong Kong-based Phoenix Television reported on its website today, citing an unidentified person. The National Bureau of Statistics is due to release first quarter and March economic data, including for inflation and economic growth, in Beijing tomorrow.

“People are still nervous about the Chinese economy in terms of a policy-induced hard landing,” said Prasad Patkar, who helps manage about $1.8 billion at Platypus Asset Management Ltd. in Sydney. “There’s a lot of talk about the inflation numbers being released tomorrow. If it’s high, people are a bit concerned about how policy setters might react to that.”

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