Asian Stocks Ex-Japan Gain as Resources Advance on Oil Rally

  • China leaders cut expansion target to between 6.5% and 7%
  • Friday report showed U.S. labor gains came with drop in wages

Asian stocks outside Japan climbed, with the regional gauge heading for the highest close this year, as raw-material shares rallied after crude oil futures gained above $36 per barrel. Tokyo shares slipped after capping their best three weeks since 2014.

The MSCI Asia Pacific Excluding Japan Index rose 0.4 percent as of 1:19 p.m. in London. The benchmark index that includes Japan was down 0.1 percent, after swinging between gains and losses, as investors weighed China’s move to cut its economic growth target and a surge in U.S. hiring that boosted optimism in the outlook for the world’s largest economy.

“It is highly unlikely that the world economy could go into recession. The U.S. recovery remains intact and we have not had a global recession without a U.S. recession in probably 100 years,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, said in an e-mail to clients. “But I still think that despite the solid risk recovery over the past three weeks, returns are likely to be very modest in 2016, at best, and downside protection will be needed.”

The Shanghai Composite Index gained 0.8 percent, after last week posting its biggest weekly rally since December. The measure is still down 18 percent this year on concern a weaker yuan will spur capital outflows and slowing economic growth will hurt earnings. The Hang Seng China Enterprises Index of mainland shares traded in Hong Kong climbed 0.8 percent, while the city’s benchmark Hang Seng Index was little changed.

China Congress

The National People’s Congress continued on Monday after the country outlined over the weekend a growth range of between 6.5 percent and 7 percent for 2016, with 6.5 percent pegged as the baseline through 2020. That would be less than last year’s 6.9 percent rate, the slowest expansion in a quarter century. The government also abandoned its trade target, underscoring the degree of uncertainty about prospects for global growth. Data on China’s foreign-currency reserve are due Monday.

“The risk-on rally has continued in Asia ex-Japan after processing the announcements from China’s National Party Congress and the release of US non-farm payrolls over the weekend,” Angus Nicholson, market analyst at IG Ltd. in Melbourne, said by email. “The face value market interpretation seems to be that strong headline growth in the NFP but weak hourly earnings growth keeps Fed rate hikes on hold, while China’s batch of 2016 targets are not only feasible but will entail greater fiscal spending and help the current pickup in commodity prices.”

Fortescue Rallies

Fortescue Metals Group Ltd., the world’s fourth-biggest iron ore producer, surged 24 percent in Sydney as the price of raw material used in making steel climbed to the highest since Oct. 16. Great Wall Motor Co. climbed 10 percent in Hong Kong after Credit Suisse Group AG upgraded its rating on the Chinese maker of sport utility vehicles to outperform. Bumi Armada Bhd. slumped 21 percent in Kuala Lumpur after saying a vessel chartering contract terminated by Woodside Energy would impact 2016 financial results.

Australia’s S&P/ASX 200 Index jumped 1 percent, while New Zealand’s S&P/NZX 50 Index was little changed. South Korea’s Kospi index gained 0.1 percent. Thailand’s SET Index advanced 1.2 percent, while the FTSE Bursa Malaysia KLCI index rose 0.3 percent. Singapore’s Straits Times Index slipped 0.5 percent, retreating from a two-month high.

Japan’s Topix index fell 1 percent as insurance companies and utilities retreated.

"Shares rebounded quite a bit and now we need to reevaluate the situation,” Seiji Iwama, a fund manager at Daiwa SB Investments Ltd., said by phone. “We’re now seeing a correction in the shares which were overbought.”

Futures on the Standard & Poor’s 500 Index fell 0.3 percent. The underlying benchmark index for U.S. equities gained 0.3 percent on Friday, led by resources stocks.

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