Asian Stocks Advance on Japan Earnings, China Industrial Profits

Asian stocks rose this week, with the regional benchmark index capping a three-month rally, as Japanese equities gained on earnings and a pickup in Chinese industrial profits highlighted the region’s growth momentum.

Sumitomo Mitsui Financial Group Inc. advanced 11 percent after quarterly net income doubled, putting Japan’s second-largest bank by market value on pace to post record annual profit. Anhui Conch Cement Co. paced gains among Chinese makers of the material in Hong Kong after Shenyin & Wanguo Securities Co. recommended the sector.

The MSCI Asia Pacific Index rose 0.7 percent to 132.71 this week, capping a 3 percent advance for January. Japan’s Nikkei 225 Stock Average extended its record weekly winning streak since at least 1970. The MSCI Asia Pacific excluding Japan Index added 0.6 percent.

“Asian markets tend to do well when global economic prospects are improving,” said Khiem Do, Hong Kong-based head of Asian multi-asset strategy at Baring Asset Management Ltd., which manages about $51 billion. “Around the world you have prospects of improving economies and therefore improving corporate earnings. The two largest economies are behaving in a positive fashion, and Japan has announced a lot of policies that are more reflationary.”

The MSCI Asia Pacific Index on Jan. 30 reached the highest level since August 2011 and has rallied about 11 percent since Nov. 14, when the announcement of Japanese elections sparked optimism a new government would add stimulus to fight deflation. The measure traded at 14.6 times average estimated earnings compared with 13.7 for the Standard & Poor’s 500 Index and 12.4 times for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Japan Rally

The Nikkei 225 gained 2.4 percent this week, capping a 12-week advance after Japan’s Cabinet Office on Jan. 28 boosted its outlook for real gross-domestic-product growth to 2.5 percent in the year to March 31, 2014, from a previous projection of 1.7 percent. Australia’s S&P/ASX 200 Index added 1.8 percent this week after it capped a 10-day rally on Jan. 30, its longest winning streak since October 2003.

Hong Kong’s Hang Seng Index gained 0.6 percent, while China’s Shanghai Composite Index advanced 5.6 percent. South Korea’s Kospi Index added 0.6 percent. Singapore’s Straits Times Index rose 0.7 percent, and Taiwan’s Taiex Index climbed 2.4 percent.

Sumitomo Mitsui surged 11 percent to 3,655 yen in Tokyo after the stock-market rally fueled third-quarter earnings that beat estimates. Nine-month profit climbed 34 percent to 550.4 billion yen, approaching the record 686.8 billion yen ($7.4 billion) reached in 2006, company figures showed.

Industrial Profits

Kawasaki Heavy Industries Ltd. jumped 7.3 percent to 281 yen after raising its operating profit forecast. Koito Manufacturing Co., which manufactures auto lights, jumped 8.5 percent to 1,502 yen after raising its full-year profit forecast.

“With economic stimulus measures and a recovery in the U.S. economy, there are a lot of expectations about earnings for Japan going forward,” said Jun Nishizaki, chief portfolio manager at Nissay Asset Management Corp., which oversees about 34 billion yen. “Profits are not that much higher this year than the last, but we’re expecting a 20 percent increase in profits in the next year.”

China Profits

Chinese mainland industrial companies’ profit rose 17 percent from a year earlier in December to 895 billion yuan ($144 billion), the National Bureau of Statistics said on Jan. 27 in Beijing.

Cement companies rose in Hong Kong after Shenyin & Wanguo said demand for the material may exceed expectations this year on infrastructure investment, rising property sales and urbanization. Anhui Conch advanced 7.3 percent to HK$30.85. China National Building Material Co. increased 6.1 percent to HK$12.48, while China Shanshui Cement Group Ltd. gained 6.9 percent to HK$5.74.

Chinese manufacturing expanded less than expected in January. The Purchasing Managers’ Index was 50.4 in January compared with 50.6 in December, the National Bureau of Statistics and China Federation of Logistics and Purchasing said yesterday in Beijing as they more than tripled the number of companies surveyed. A separate gauge from HSBC Holdings Plc and Markit Economics covering fewer businesses rose to a two-year high of 52.3 from 51.5. Readings above 50 indicate expansion.

Hengdeli Holdings Ltd., the Chinese retail partner of Swatch Group AG, slumped 12 percent to HK$2.74 in Hong Kong after Next Magazine reported it may have lost distribution rights for some Swiss-watch brands.

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