Asian Stocks Post Weekly Gain as Chinese Shares Rally

Asian stocks rose this week after Chinese shares rallied amid signs the world’s second-largest economy is stabilizing, and as companies from Lenovo Group Ltd. to Tata Steel Ltd. posted profit that exceeded estimates.

China Shenhua Energy Co., the nation’s No. 1 coal producer, advanced 6.4 percent in Hong Kong after the nation’s industrial electricity demand increased last month. Lenovo, the world’s biggest maker of personal computers, gained 4.4 percent. Tata Steel, India’s biggest producer of the metal, jumped 7.6 percent.

The MSCI Asia Pacific Index gained 0.3 percent this week. The Shanghai Composite Index climbed 0.8 percent and the Hang Seng Index led developed-market gains after reports on industrial production and exports this month added to signs China’s economy is improving.

“The rest of the year will be better for the Chinese market because expectations got so low,” Daphne Roth, Singapore-based head of Asia equity research at ABN Amro Private Bank, which oversees about $207 billion, said by telephone this week. “That’s why we’re still overweight on Chinese equities and valuations are among the cheapest. With expectations so low, it’s quite easy for the market to outperform.”

China Everbright Securities Co. said yesterday it was investigating a trading error after the Shanghai Composite Index posted its biggest intraday surge since March 2009, briefly swinging from a loss to a gain of as much as 5.6 percent.

The Shanghai Composite Index was valued at 9.1 times estimated earnings as of yesterday, compared with multiples of 13.04 for the MSCI Asia Pacific Index and 15.02 times for the Standard Poor’s 500 Index, according to data compiled by Bloomberg.

‘Cheap and Attractive’

“China’s overall market is stabilizing, relieving concerns regarding the hard landing scenario for the rest of this year,” said Agnes Deng, head of Hong Kong and China equities at Baring Asset Management Ltd., which manages about $57 billion globally, in a Aug. 12 interview. “China stocks’ valuation is quite cheap and attractive.”

Hong Kong’s Hang Seng Index climbed 4 percent. The trading week in the city was shortened as the market was shut on Aug. 14 due to a typhoon. The Hang Seng China Enterprises Index of mainland companies traded in the city jumped 6.5 percent.

Japan’s Topix index gained 0.2 percent, while the Nikkei 225 Stock Average rose 0.3 percent. The nation’s economy expanded an annualized 2.6 percent in the second quarter, slowing from a revised 3.8 percent in the previous three months. The median forecast of economists surveyed by Bloomberg News was for 3.6 percent growth.

‘Peaking Now’

“I’m relatively cautious on the stock market,” Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo, said on Bloomberg television. “Next year there is a chance that Japan goes into a recession, and the financial markets usually see that half a year in advance. I would expect the stock market to be peaking now.”

The Topix has gained 33 percent this year, the world’s best-performing developed equity market.

South Korea’s Kospi index gained 2.1 percent. Taiwan’s Taiex index added 0.9 percent. Australia’s S&P/ASX 200 Index increased 1.2 percent.

New Zealand’s NZX 50 Index lost 0.4 percent. Trading was temporarily halted yesterday after a magnitude 6.2 earthquake struck central New Zealand, shaking the capital city Wellington and sending the nation’s currency lower.

Energy Producers

Energy companies posted the biggest advance among the 10 industry groups in the MSCI Asia Pacific Index this week. Chinese coal producers advanced as a government report on Aug. 14 showed industrial electricity use in July climbed to the highest monthly total in a year.

China Shenhua rose 6.4 percent to HK$24.85 in Hong Kong this week. China Coal Energy Co., the nation’s second-biggest producer of the fuel, added 5.9 percent to HK$4.88. Yanzhou Coal Mining Co. jumped 9.1 percent to HK$6.50. The three companies are reporting their quarterly results next week.

Lenovo rose 4.4 percent to HK$7.88. Net income climbed 23 percent from a year earlier to $173.9 million in the three months ended June after the Chinese company increased its global market share for tablet computers, smartphones and PCs.

Tata Steel gained 7.6 percent to 235.35 rupees in Mumbai after reporting first-quarter profit almost doubled to 11.4 billion rupees ($184 million), aided by a one-time deferred tax gain at its European unit.

Earnings Performance

About 50 percent of the companies on the MSCI Asia Pacific Index that reported quarterly earnings since July 1 and for which estimates are available have exceeded expectations, according to data compiled by Bloomberg.

Hyundai Merchant Marine Co., South Korea’s biggest shipping line, surged 31 percent since Aug. 9 to 24,650 won. The company this week posted second-quarter net income of 31.7 billion won ($28.5 million), compared with a net loss of 158.2 billion won a year earlier.

Shares also advanced after North Korea and South Korea agreed to reopen the jointly operated Gaeseong industrial complex. Hyundai Merchant is the biggest shareholder of Hyundai Asan Corp., which manages a resort in communist North Korea.

Among stocks that declined, Thai Beverage Pcl, a brewer controlled by billionaire Charoen Sirivadhanabhakdi, sank 4.5 percent to 53 Singapore cents after posting lower sales and profit.