Asian Stocks Cap Best Week Since April on Growth Optimism, China

Asian shares rose this week, with the regional benchmark posting its biggest increase since April, amid signs the Japanese and U.S. economies are improving. Stocks in Hong Kong rebounded on optimism the recent rout amid concerns of a Chinese cash crunch was overdone.

Toyota Motor Corp., the world’s biggest carmaker, advanced 2.6 percent in Tokyo as the yen weakened against the dollar for a second week. Industrial & Commercial Bank of China Ltd., the world’s second-largest lender by market value, rebounded 5.8 percent after tumbling last week. Woori Finance Holdings Co. gained 5.4 percent in Seoul after the government announced plans to separate the nation’s largest financial group by assets into three parts.

The MSCI Asia Pacific Index rose 2.2 percent this week, its biggest such increase since the week through April 26 when the measure rose almost 3 percent. The MSCI Asia Pacific Index has retreated 9.6 percent from the closing level on May 20, which was the highest since June 2008.

“More growth means equities have a very good fundamental reason to continue rallying as we look through the noise,” Michael Kurtz, Hong Kong-based head of global equity strategy at Nomura Holdings Inc., said on Bloomberg Television. “China stocks are starting to look substantially undervalued. Investors with a medium to long-term perspective should be taking this as an opportunity to go shopping.”

Week’s Move

The MSCI Asia Pacific Index began trading lower earlier in the week on concerns the U.S. Federal Reserve would taper monetary easing and as China’s money markets endured their worst cash crunch in at least a decade. The measure ended June trading down 3.2 percent, its second month of losses and capping its first quarterly slump in a year.

Shares advanced through the week’s second half after Japanese reports showed the economy strengthened in May, amid assurances the Federal Reserve won’t soon end stimulus efforts and China’s central bank has said it provided liquidity to financial institutions to steady money-market rates.

The Standard & Poor’s 500 Index rose 0.9 percent in New York this week. Consumer spending in the U.S. rebounded in May, household purchases and incomes advanced, Commerce Department figures showed on June 27. Consumer sentiment held close to a six-year high in June as rising home values gave Americans more reason to be optimistic about the economy.

Asia’s benchmark trades at 12.7 times average estimated earnings, compared with multiples of 14.6 for the Standard & Poor’s 500 Index and 12.7 for the Europe STOXX 600 Index, according to data compiled by Bloomberg.

Regional Benchmarks

South Korea’s Kospi Index gained 2.2 percent. Singapore’s Straits Times Index rose 0.8 percent. Taiwan’s Taiex Index advanced 3.5 percent.

Australia’s S&P/ASX 200 Index climbed 1.4 percent. Kevin Rudd’s victory as leader of Australia’s governing Labor Party may boost consumer and company confidence before an election that could be held as early as August, according to investors, economists and business leaders.

Japan’s Topix index climbed 3.1 percent to 1,133.84 this week, its second weekly gain. The gauge rose more than 50 percent in the nine months since the end of September, the biggest rally across three quarters since 1972. The yen lost 1.3 percent against the dollar, down for a second week. A weaker yen boosts the outlook for Japanese exporter earnings when repatriated.

Toyota advanced 2.6 percent to 5,990 yen. Honda Motor Co., which gets at least 80 percent of its revenue abroad, rose 2.9 percent to 3,685 yen. Panasonic Corp., which gets almost half its sales outside of Japan, jumped 8.7 percent to 797 yen.

Japanese Growth

Japanese shares also rose after government data showed the country’s industrial production rose more than economists expected last month. The Trade Ministry said industrial output expanded 2 percent, compared with the median 0.2 percent increase projected by 32 economists surveyed by Bloomberg. Consumer prices excluding fresh food were unchanged on the year, leaving negative territory for the first time since October.

The Hang Seng Index advanced 2.7 percent, after falling to its lowest level in nine months on June 24. China’s Shanghai Composite Index dropped 4.5 percent, closing at the lowest level since January 2009 on June 27.

The Hang Seng China Enterprises Index, also known as the H-share index, has fallen more than 20 percent from its Feb. 1 high, meeting some investors’ definition of a bear market. The measure traded at 6.6 times estimated earnings on June 25, 39 percent below its five-year average and the lowest since October 2008, according to data compiled by Bloomberg. The gauge increased 0.8 percent this week.

China Cash Crunch

Fitch Ratings Ltd. cut its 2013 growth forecast for China on June 27, saying a jump in interbank rates this month on tighter monetary conditions is likely to “pose further headwinds.” The overnight repurchase rate of 6.65 percent on June 24 was more than double this year’s average.

China’s central bank will use various tools to adjust liquidity, People’s Bank of China Governor Zhou Xiaochuan said at the Lujiazui forum in Shanghai on June 28.

“Hong Kong and Chinese shares are very cheap,” said Binay Chandgothia, a fund manager at Principal Global Investors in Hong Kong, where he helps oversee $280 billion. “Downside should be limited for Hong Kong unless you get into a full-blown financial crisis. Investor sentiment is fairly weak, markets look oversold short term but for contrarian investors, it’s probably a good time to get in.”

‘Some Relief’

Industrial & Commercial Bank of China advanced 5.8 percent to HK$4.89. The shares rebounded from an 8.9 percent loss the previous week, its biggest weekly drop since June 2012. China Overseas Land & Investment Ltd., the largest mainland property company traded in Hong Kong, on speculation the government will remove a ban on refinancing for real-estate development to help ease a credit crunch.

Shanghai Securities News reported the southern Chinese province of Guangdong may let qualified individuals begin investing in securities listed on the Hong Kong stock exchange.

“The message from China’s central bank led to some relief,” said Mari Oshidari, a Hong Kong-based market strategist at Okasan Securities Group Inc. “Valuations are cheap. With concern about a short-term credit crunch, the market was trying to find a catalyst to reverse losses. But worries about China’s slowdown remains.”

Among stocks that fell Totenko Co., a Japanese restaurant operator, plunged 26 percent to 189 yen. Kyodo News reported Shin Shin, a giant panda in Ueno Zoological Gardens, which is near Totenko’s main store, may have shown false signs of pregnancy. Pandas draw a large number of visitors. Seiyoken KK, the operator of a French restaurant near the zoo, slumped 34 percent to 620 yen.

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