Asian Stocks Boosted as China Equities Rally to January High

  • Shanghai Composite Index gains on optimism over Shenzhen Link
  • Topix index drops on light trading after Japan’s GDP report

WisdomTree's Koll: Japan's Economy Is Stalling

Asian stocks outside Japan rose as Chinese shares climbed to the highest since January on optimism details of a trading link between Shenzhen and Hong Kong will soon be announced. Equities in Tokyo slid amid data showing the economy expanded at a slower pace than forecast.

The MSCI Asia Pacific Excluding Japan Index climbed 0.3 percent to 451.11 as of 5:35 p.m. in Tokyo. The Shanghai Composite Index advance 2.4 percent after the Hong Kong Economic Journal said small-cap shares in Shenzhen will be included in the trading link and the start date may be announced as soon as this week. After a choppy start to the year, Asian stocks outside Japan have climbed 26 percent from a January low, shrugging off the effects of Britain’s vote to leave the European Union as central banks unleash further monetary easing.

“The road ahead may be bumpy but Asian equities ex-Japan are relatively undervalued, under owned and under appreciated,” Vasu Menon, vice president for wealth management research at Oversea-Chinese Banking Corp. in Singapore, said by phone. “It could do better than other regions over the next few years once we see greater stability in China and greater clarity with Fed policy.”

China’s Shanghai Composite Index extended gains for a second day, closing at the highest level since Jan. 8. The Hang Seng China Enterprises Index of mainland stocks trading in Hong Kong rose for a eighth day, jumping 1.6 percent, while the benchmark Hang Seng Index increased 0.7 percent.

Shenzhen Link

The China Securities Regulatory Commission is pushing ahead with preparations for the link between Hong Kong and Shenzhen, which expands on an existing connect with Shanghai, and the program will start this year when appropriate, the regulator’s spokesman Deng Ge said at a briefing in Beijing on Friday.

Equities were also helped as real estate companies rallied after stake purchases by China Evergrande Group fueled optimism of more mergers. Billionaire Hui Ka Yan’s Evergrande has boosted stakes in both China Vanke Co. and Langfang Development Co.

Australia’s S&P/ASX 200 Index added 0.2 percent. New Zealand’s S&P/NZX 50 Index gained 0.3 percent. Taiwan’s Taiex index closed little changed. Thailand’s SET Index climbed 0.1 percent. Vietnam’s Ho Chi Minh Stock Index advanced 0.6 percent.

The Jakarta Composite Index slid 1.2 percent, its fifth day of losses, amid valuations near the highest level since 2007. Data on Monday showed Indonesia’s exports in July trailed estimates.

‘Tricky Juncture’

“We are at a tricky juncture for Asian markets now and we will be watching keenly how markets settle following the recent gains,” said Mixo Das, a Singapore-based strategist at Nomura Holdings Inc. “We are looking to take profits now and we have gone neutral on Asian equities.”

Japan’s Topix index dropped 0.5 percent. Gross domestic product expanded by an annualized 0.2 percent, less than the median estimate of economists for a 0.7 percent increase, as business spending contracted. Policy makers are struggling to find a strategy to produce consistent growth, with the economy oscillating between slight expansion and contraction. Businesses and consumers have been reluctant to spend, resulting in negative GDP numbers in five quarters over the past three years.

Sharp Corp. jumped 10 percent in Tokyo after completing the sale of a stake to Foxconn Technology Group, ending a four-month wait for the cash-strapped Japanese maker of flat panel televisions. Aurizon Holdings Ltd. slumped 6 percent in Sydney after the rail freight company posted full-year profit that missed analyst estimates. Citic Securities Co. and Haitong Securities Co. rose at least 3.9 percent in Hong Kong, pacing gains among Chinese brokerages, as trading volumes surged in the mainland.

Futures on the S&P 500 Index rose 0.2 percent. The U.S. equity benchmark index slipped 0.1 percent on Friday as lackluster data offered little incentive for investors to push equities higher after the three main benchmarks reached records on Thursday. A report Friday showed sales at U.S. retailers were little changed in July as Americans flocked to auto dealers at the expense of other merchants.

West Texas Intermediate crude futures rose 0.9 percent on Monday after posting the biggest weekly increase since April. The contracts climbed 6.4 percent last week as Saudi Arabia signaled it’s prepared to discuss stabilizing markets at informal OPEC discussions next month. Venezuela’s oil and foreign ministers will visit producer countries to lobby for price increases ahead of the talks.

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