Asian Stocks Post First Gain in Eight Weeks on Europe Optimism
June 24, 2011, 7:24 PM EDTBy Jonathan Burgos and Shani Raja
June 25 (Bloomberg) -- Asian stocks climbed, driving the region’s key benchmark index to its first advance in eight weeks, as concern Europe’s debt crisis will hurt earnings of exporters and banks eased and the Federal Reserve said it is prepared to provide further stimulus to the U.S. economy if needed.
Toyota Motor Corp., the world’s biggest carmaker by market value, increased 3.5 percent in Tokyo through the week. Commonwealth Bank of Australia, the nation’s largest lender, gained 3.3 percent in Sydney. Foster’s Group surged 13 percent as SABMiller Plc said it will continue to pursue Australia’s biggest brewer after the company rejected its A$9.5 billion ($10 billion) offer. Air China Ltd. led a rally among airlines as oil futures fell.
“The high oil price was a massive constraint on a fragile recovery, so anything that takes the froth off the energy market is positive for growth,” said Nader Naeimi, a Sydney-based strategist for AMP Capital Investors Ltd., which has almost $100 billion under management. “With Greece, they’ve managed to kick the can further down the road, but any progress in avoiding contagion to the rest of Europe is going to be welcomed.”
The MSCI Asia Pacific Index rose 2 percent to 132.24 this week, snapping its longest series of weekly losses since 2004, as European Union leaders pledged to stabilize the euro-area economy and stave off a Greek default as long as the country’s parliament passes a package of budget cuts.
The seven-week slump amid speculation Greece will default on its debt payments and signs the U.S. economic recovery is faltering exceeded a six-week streak of declines in the aftermath of the September 2008 collapse of Lehman Brothers Holdings Inc.
‘Uncertainty Lies Ahead’
“The progress over the past few days on Greece has been welcome,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “We’re still a long way from a resolution of this issue, and I suspect further volatility and uncertainty lies ahead. Investors therefore remain cautious and conservative.”
Stocks advanced even after the Fed cut its growth forecast for the U.S. economy on June 22. The central bank said it would complete $600 billion in bond-buying as scheduled this month. While the outlook for employment and inflation is better than it was before the latest bond purchases, Chairman Ben S. Bernanke said policy makers would be “prepared to take additional action, if conditions warranted.”
Market Oversold
Toyota added 3.5 percent to 3,285 yen. Samsung Electronics Co., which gets 20 percent of sales from Europe, climbed 4 percent to 852,000 won in Seoul. Cosco Pacific Ltd., which operates container facilities at Greece’s Piraeus port, advanced 4.8 percent to HK$13.88 in Hong Kong.
Commonwealth Bank of Australia rose 3.3 percent to A$51.13 in the week. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, climbed 3.9 percent to 376 yen in Tokyo. Smaller rival Mizuho Financial Group Inc. advanced 5.8 percent to 128 yen.
Japan’s Nikkei 225 Stock Average gained 3.5 percent this week. South Korea’s Kospi Index advanced 2.9 percent. Hong Kong’s Hang Seng Index increased 2.2 percent, while China’s Shanghai Composite Index climbed 3.9 percent.
“The news out of Greece is good for a bounce in markets, particularly as they are very oversold,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd., which manages about $98 billion in Sydney. “There is still a lot of water to go under the bridge before Greece gets a new bailout package, and uncertainty still remains about the strength of the global economic recovery. It could remain a volatile ride for a while yet.”
Foster’s, Korea Express
The MSCI Asia-Pacific index lost 6.1 percent since the peak in May, dragging valuations of stocks in the benchmark index to 13.2 times estimated earnings on June 20, the lowest since April 20, according to data compiled by Bloomberg.
Foster’s Group surged 13 percent to A$5.21. SABMiller, the world’s biggest brewer by volume, said on June 21 it will continue to pursue the Australian brewer after Foster’s rejected the A$4.90-a-share offer. The London-based brewer may have to raise its offer by 8.2 percent to A$5.30 share to secure a friendly takeover, according to the median estimate of seven analysts surveyed by Bloomberg.
Korea Express Co., a logistics company, jumped 19 percent to 137,000 won in Seoul after Samsung SDS Co., a computer networking company, said it will make a joint bid with steelmaker Posco.
Airline shares rallied after oil futures dropped for a fourth week, after the International Energy Agency’s decided on June 23 to release 60 million barrels of oil over the next month, half of from the U.S. reserves.
‘Airlines Face Challenges’
Air China, the world’s biggest carrier by market value, jumped 11 percent to HK$7.76 in Hong Kong. China Airlines Ltd., Taiwan’s largest airline, gained 6.7 percent to NT$19.05 in Taipei. All Nippon Airways Co., Japan’s No. 1 carrier by sales, rose 5.3 percent to 260 yen in Tokyo.
“In the short-term, oil prices falling alone is a positive factor for airlines,” said Danny Yan, a fund manager at Haitong International Asset Management, which oversees $600 million. “However, airlines still face challenges. The decision to increase oil supply is only temporary.”
Li & Fung Ltd., the world’s biggest supplier of clothes and toys to retailers, jumped 13 percent to HK$16.06 after Deputy Chairman William Fung said on June 23 its customer Wal-Mart Stores Inc. may benefit from a flagging U.S. economic recovery. The stock was upgraded to “buy” from “sell” at Samsung Securities Ltd. and to “buy” from “hold” at Deutsche Bank AG.
Among stocks that dropped, RHB Capital Bhd. slumped 10 percent to 8.75 ringgit in Kuala Lumpur trading after bigger rivals CIMB Group Holdings Bhd. and Malayan Banking Bhd. scrapped talks to acquire the nation’s fifth-biggest lender.
--With assistance from Akiko Ikeda and Toshiro Hasegawa in Tokyo. Editors: Nick Gentle, Paul Tighe
To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Shani Raja in Sydney at sraja4@bloomberg.net.
To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.
