Asian Stocks Rally as China Factory Data Boosts Stimulus Outlook

  • Chinese manufacturing PMI drops to lowest in three years
  • Nikkei closes above 20,000 for first time since August

Asian stocks rose following Monday’s selloff as investors focused on the positives from Chinese data that showed manufacturing contracting to the lowest in three years.

The MSCI Asia Pacific Index jumped 1.8 percent to 134.10 as of 4:54 p.m. Hong Kong time after dropping 1 percent on Monday to cap a 2 percent November decline. Material companies and utilities led gains on Tuesday as all of the measure’s 10 industry groups rose. China’s official purchasing managers index for November was 49.6, slightly below economists estimates for 49.8 and the lowest since August 2012.

“The PMI was worse than expected, so this may prompt more stimulus,” said Mikio Kumada, a Hong Kong-based global strategist at LGT Capital Partners Ltd. “The seasonal pattern always favors equities toward the end of the year.”

Six interest-rate cuts over the past year haven’t been enough to spur a recovery in Chinese manufacturing, which has continued to weaken, while activity in the services sector has shown more strength. The non-manufacturing PMI rose to 53.6 from 53.1 a month earlier. Numbers below 50 indicate deterioration.

The Shanghai Composite Index was stable on Tuesday, closing 0.3 percent higher, following two days of volatility triggered by regulatory probes of brokerages. Property companies rallied the most in three months on speculation the government will boost stimulus, with Poly Real Estate Group Co. surging by the daily limit of 10 percent.

Japan’s Nikkei 225 Stock Average rose 1.3 percent to close above 20,000 for the first time since August as government data showed capital spending jumped more than expected and company profits increased in the third quarter. Sosei Group Corp. soared 17 percent after Pfizer Inc. agreed to buy a 3 percent stake in the Tokyo-based drug maker.

RBA Decision

Australia’s S&P/ASX 200 Index jumped 1.9 percent after the nation’s central bank extend its interest-rate pause for a seventh month, in line with economist expectations, as the labor market remains resilient and the economy expands steadily despite a plunge in mining investment.

South Korea’s Kospi index increased 1.6 percent, while New Zealand’s S&P/NZX 50 Index rose 0.8 percent. India’s S&P BSE Sensex index climbed to a three-week high after the Reserve Bank of India indicated it could ease monetary policy further even as it kept borrowing costs unchanged on Tuesday.

Hong Kong’s Hang Seng Index rallied 1.8 percent, the most since Nov. 12. Public transportation provider MTR Corp. erased losses of as much as 3.1 percent to close in line with the market after announcing the Hong Kong government will bear the costs for the company’s railway project linking the city to mainland China.

Reserve Currency

The International Monetary Fund will add the yuan to its basket of reserve currencies, an international stamp of approval of the strides China has made integrating into a global economic system dominated for decades by the U.S., Europe and Japan. Approval was expected after IMF Managing Director Christine Lagarde announced Nov. 13 that her staff recommended inclusion, a position she supported.

E-mini futures on the Standard & Poor’s 500 Index rose 0.4 percent. The underlying gauge lost 0.5 percent on Monday, trimming November’s advance to less than 0.1 percent. As investors await payroll figures on Friday, traders are now pricing in a 74 percent chance the Federal Reserve will raise interest rates in December.

The Stoxx Europe 600 Index rose 0.5 percent on Monday to close at a three-month high on bets the region’s central bank will increase stimulus at this week’s meeting. Economists surveyed by Bloomberg unanimously predict the European Central Bank will expand stimulus on Thursday.

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