Asian Stocks Rise as Commodity Prices Gain; Korea Zinc Surges
May 24, 2011, 6:50 AM EDTBy Shani Raja and Anna Kitanaka
May 24 (Bloomberg) -- Asian stocks rose, snapping three straight days of losses, as commodity prices advanced after Goldman Sachs Group Inc. suggested buying oil, copper and zinc and as Sony Corp. said it expects to turn to profit.
Korea Zinc Co., which also produces gold and silver, jumped 6.6 percent in Seoul. Jiangxi Copper Co., China’s No. 1 producer of the metal, advanced 1.4 percent in Hong Kong. Sony gained 2.7 percent after saying it expects to turn to profit in fiscal 2011. Li & Fung Ltd., a supplier to retailers including Wal-Mart Stores Inc., slid 2.7 percent in Hong Kong as reports signaled economic growth in the U.S. and Europe is slowing.
“Markets are quite twitchy,” said Nader Naeimi, a Sydney- based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management. “The data is blowing hot and cold, so for a while it’s going be a case of two steps up, one step down.”
The MSCI Asia Pacific Index added 0.3 percent to 131.95 as of 7:10 p.m. in Tokyo, after dropping as much as 0.4 percent earlier. More than five stocks rose for every four that fell on the gauge. The index slid last week for the third straight week as Greece’s debt crisis intensified, Japan’s economy contracted, and disappointing U.S. economic data fueled concern about the global recovery.
Japan’s Nikkei 225 Stock Average rose 0.2 percent and South Korea’s Kospi Index gained 0.3 percent. Hong Kong’s Hang Seng Index added 0.1 percent. The Shanghai Composite dropped, ending the day 9.5 percent below a five-month high reached on April 18, near the 10 percent level that marks a so-called “correction.” Australia’s S&P/ASX 200 Index decreased 0.3 percent.
Europe Debt Crisis
Futures on the Standard & Poor’s 500 Index climbed 0.2 percent. The index retreated 1.2 percent in New York yesterday, the most since March 16, as commodities slumped amid concern Europe’s debt crisis is worsening and the global economic recovery is losing momentum.
Korea Zinc surged 6.6 percent to 374,000 won in Seoul. Jiangxi Copper advanced 1.4 percent to HK$24.65 in Hong Kong. Cnooc Ltd., China’s biggest offshore oil producer, climbed 1.1 percent to HK$18.06 in Hong Kong.
Goldman Sachs suggested buying oil, copper and zinc even as it cut forecasts for Asian earnings and economic growth.
The brokerage advised a return to raw materials after suggesting to investors last month to sell copper and oil. Goldman raised its three-, six- and 12-month forecasts for Brent crude futures as Libyan supply cuts lead to the “effective exhaustion” of spare production capacity in the Organization of Petroleum Exporting Countries.
Oil, Copper
Oil futures climbed as much as 1.5 percent in New York today, reversing earlier declines, while copper rose as much as 1.8 percent on the London Metal Exchange.
Sony rallied 2.7 percent to 2,270 yen in Tokyo, leading the region’s technology stocks higher. Japan’s No. 1 electronics exporter, which reported a full-year net loss of 260 billion yen ($3.2 billion) for the past fiscal year, said it expects to turn to profit in fiscal 2011.
The MSCI Asia Pacific Index lost 4.4 percent this year through yesterday, compared with a gain of 4.8 percent by the S&P 500 and a drop of 0.4 percent by the Stoxx Europe 600 Index. Stocks in the Asian benchmark were valued at 13.2 times estimated earnings on average, compared with 13.3 times for the S&P 500 and 11 times for the Stoxx 600.
Li & Fung slid 2.7 percent to HK$17.38 in Hong Kong. LG Electronics Inc., the world’s third-largest maker of mobile phones that counts North America as its biggest market, lost 1.5 percent to 101,000 won in Seoul. Billabong International Ltd., the world’s No. 1 surfwear maker, dropped 1.5 percent to A$5.87.
Below-Trend Growth
The Federal Reserve Bank of Chicago’s gauge of economic activity unexpectedly dropped below zero in April. The national index, which draws on 85 economic indicators, was minus 0.45 in April versus 0.32 in March. A reading below zero indicates below-trend growth in the national economy.
“Recovery in the U.S. economy is coming to a halt,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “Momentum lacks strength in Europe, and in China and there’s a sense of caution against the global economy.”
In Europe, services and manufacturing growth slowed more than economists forecast in May. A composite index based on a survey of euro-area purchasing managers in both industries fell to a seven-month low of 55.4 from 57.8 in April, London-based Markit Economics said yesterday.
That’s the largest drop since November 2008 and less than the median forecast of 17 economists surveyed by Bloomberg for a reading of 57.3. A reading above 50 indicates expansion.
Belgium had the outlook on its AA+ credit rating lowered to negative from stable at Fitch Ratings, which cited concern over the pace of structural reform.
“You have a contagion issue from the European debt crisis, while on the other hand you have indications that the global recovery is broadly strengthening but has hit a soft patch,” said AMP Capital’s Naeimi.
--With assistance from Akiko Ikeda and Toshiro Hasegawa in Tokyo. Editor: Reinie Booysen
To contact the reporters on this story: Shani Raja in Sydney at sraja4@bloomberg.net; Anna Kitanaka in Tokyo at akitanaka@bloomberg.net
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net
