Asian Stocks Post Weekly Advance on ECB, China Stimulus

Asia’s benchmark stock index posted its first advance in three weeks as shares rallied by the most in nine months on Sept. 7, after the European Central Bank unveiled a bond-buying program and China boosted stimulus measures.

HSBC Holdings Plc, Europe’s biggest lender, rose 2.7 percent in Hong Kong. China Railway Construction Corp. climbed 14 percent, leading the nation’s builders, after the government announced plans to build new railways and roads. Lynas Corp. surged 28 percent in Sydney after the developer of the world’s largest rare-earth refinery in Malaysia received a permit to start production in the Southeast Asian country.

The MSCI Asia Pacific Index rose 1.1 percent to 119.10 this week. The gauge declined in the previous two weeks as signs of a global economic slowdown outweighed expectations for further stimulus measures. The measure rallied by the most since Dec. 1 yesterday after ECB President Mario Draghi said policy makers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area.

“The risk premium on Asia could be lifted for a little while,” said Diane Lin, a fund manager with Sydney-based Pengana Capital Ltd., which oversees about $1.1 billion in global assets. “Whether the ECB’s action itself is going to be sustainable and fundamentally improve the outlook, we still need to see.”

Biggest Advance

China’s Shanghai Composite Index climbed 3.9 percent this week, the biggest weekly advance since the period ended Oct. 28 and the most among major Asia-Pacific indexes. The government yesterday announced plans to build 2,018 kilometers (1,254 miles) of roads, two days after unveiling plans to build subways in 18 cities. Required investments weren’t disclosed.

Hong Kong’s Hang Seng Index gained 1.6 percent. Japan’s Nikkei 225 Stock Average rose 0.4 percent. South Korea’s Kospi Index increased 1.3 percent. Australia’s S&P/ASX 200 Index added 0.2 percent.

The MSCI Asia Pacific Index has fallen more than 7 percent from this year’s high on Feb. 29, dragging the value of shares on the Asian benchmark index to 12.5 times estimated earnings. That compares with 13.9 times for the Standard & Poor’s 500 Index and 12 times for the Stoxx Europe 600 Index.

Europe Crisis

Companies that do business in Europe advanced. Draghi said policy makers agreed on Sept. 6 to reduce interest rates for struggling nations and fight speculation of a breakup of the euro.

HSBC rose 2.7 percent to HK$68.90 in Hong Kong. Esprit Holdings Ltd., the clothier that counts Europe as its biggest market, jumped 6.1 percent to HK$12.58. Hutchison Whampoa Ltd., an owner of utilities, retail-chain and ports that gets about 55 percent of revenue from Europe, added 2.3 percent HK$69.40.

The bond plan “takes another European crisis episode off the table for at least the rest of this year,” said Andrew Pease, chief investment strategist at Russell Investment Group in Sydney, which manages about $150 billion. “It does minimize the tail risk in Europe. There’s no doubt about it.”

Jobless Benefits

Exporters to the U.S. advanced. Fewer Americans claimed jobless benefits in the week ended Sept. 1, while the services industry expanded at a faster pace in August, separate reports yesterday showed.

Toyota Motor Corp., the world’s biggest carmaker by market value, rose 3.6 percent to 3,205 yen in Tokyo. Honda Motor Co., which gets about 44 percent of sale from North America, climbed 5.2 percent to 2,600 yen. Sony Corp., Japan’s largest exporter of consumer electronics products, gained 3.1 percent to 908 yen.

China’s biggest construction companies rallied as the government stepped up investments in infrastructure projects. China Railway Construction, which builds more than half of the nation’s railways, climbed 14 percent to HK$6.66. China Railway Group Ltd. jumped 10 percent to HK$3.22. CSR Corp., the country’s biggest trainmaker, gained 2.5 percent to HK$5.39.

Information technology companies and raw material producers posted the biggest advance this week among the 10 industry groups in the MSCI Asia Pacific Index.

Japanese Utilities

Lynas Corp. surged 28 percent to 82 Australian cents in Sydney. The Malaysian Atomic Energy Licensing Board on Sept. 5 today granted a temporary operating license for the rare-earths miners’ refining plant, enabling Lynas start production next month following earlier delays.

Japanese electricity producers were among the stocks that fell this week as the government considers phasing out nuclear plants over the next two decades. Four of 10 nuclear plant operators, including Hokkaido Electric and Tokyo Electric Power Co., would become insolvent if Japan goes non-nuclear, the trade ministry’s Agency for Natural Resources and Energy said in June.

Tokyo Electric, owner of the Fukushima nuclear plant crippled by the March 2011 earthquake and tsunami, slipped 3.1 percent to 127 yen. Hokkaido Electric Power Co. decreased 13 percent to 523 yen. Shikoku Electric Power Co. sank 16 percent to 801 yen, the most on the MSCI Asia Pacific.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE